The European Commission (EC) has proposed amendments to key EU corporate tax legislation to close corporate tax avoidance loopholes and introduce a common anti-abuse rule say Harris & Co accountants Northampton.
The proposal will close loopholes in the Parent-Subsidiary Directive, originally conceived to prevent double taxation of same-group companies based in different member states, by updating the anti-abuse provision in the directive and ensuring that it is tightened up so that specific tax planning arrangements (hybrid loan arrangements) cannot benefit from tax exemptions.
Member states are expected to implement the amended directive by 31 December 2014.
The revision of the Parent Subsidiary Directive is just one of the measures announced in the EC’s Action Plan, presented on 6 December 2012, for a more effective EU response to tax evasion and avoidance.
Algirdas Šemeta, commissioner for taxation said that EU tax policy is heavily focussed on creating a better environment for businesses in the EU.
‘This means breaking down tax barriers and tackling cross-border problems such as double taxation. But when our rules are abused to avoid paying any tax at all, then we need to adjust them. Today"s proposal will ensure that the spirit, as well as the letter, of our law is respected. As such, it will ensure greater revenues for national budgets and fairer competition for our businesses,’ said Šemeta.
The change was welcomed by the ICAEW chief executive.
‘With the EU’s Parent Subsidiary Directive there is a mis-match between what the directive was set up to achieve, namely preventing companies from incurring extra costs from operating in more than one EU Member State by paying double-taxation, and what it has resulted in; some companies escaping taxes altogether. Making changes to ensure the directive works in the way intended will help clarify the rules for companies and also help governments collect the taxes they are due,’ said Izza.