Brussels, 04/04/2014 (Agence Europe) - The European Parliament (EP) says that the review of the parent company/subsidiary directive should remove loopholes that allow companies to wriggle out of tax by shopping around among different national tax systems for intragroup payments (see EUROPE 10970).
The exemptions and deductions allowed in Directive 2011/96/EU allow a parent company to use hybrid loans to avoid tax on profits by transferring them to a subsidiary in the form of a tax-deductible loan in the country where the subsidiary operates, with the cash being sent back in the form of a loan repayment that is tax-free in the country where the subsidiary is registered.
Adopting an own-initiative report on Thursday 3 April by Mojca Kleva Kekus (S&D, Slovenia), the MEPs backed the draft legislation's aims of introducing an anti-abuse rule to allow member states to a) ignore creative accounting and schemes used to avoid tax and to focus on real economic data; b) levy tax in the country where the parent company is registered if payments are made by a subsidiary under a hybrid loan which is tax-free in the country where the subsidiary is registered.
The EP rejected an amendment to prevent member states from using bilateral agreement to identify parent companies by replacing the capital involvement criterion by a voting rights criterion. (MB)