Brussels, 12/01/2004 (Agence Europe) - On 30 December, the European Commission adopted a proposal of directive aimed at strengthening the directive of 3 June 2003 establishing a common tax regime applicable to interest and royalties payments between associated companies of different Member States.
The directive mainly provides for the abolition of all taxation on interest payments and royalties in the Member States from where these payments come, for the tax to be levied through withholding at source or collected by means of assessment books when the beneficiary of interest and royalties is a company from another Member State(or a stable establishment located in another Member State of a Member State company). Considering that the payment of interests and royalties must be subject to taxation in a member State once, the Council had nonetheless stressed the possibility of abuse and fraud opened by this provision and called on the Commission to present proposals aimed at eliminating any shortcomings that allow the imposition of interest and dividend payments to be avoided. The proposal of 30 December answers this Council invitation as it recommends making exoneration of the tax on interests and royalties in the Member State of origin subject to their effective imposition in the Member State where they are collected ("the other Member State").
The proposal also provides for the list of companies annexed to the directive on interests and royalties to be aligned to the list proposed for the new casting of the "parent-subsidiaries" directive. The Commission also proposes that the European Company (whose statute will take effect on 8 October 2004) and the European Cooperative Society (whose statute, adopted on 22 July 2003, will take effect in 2006) be explicitly set out in the list of companies annexed to the directive on interests and loyalties. The Commission hopes that the provisions proposed will effectively come into force by end 2004 at the latest. The directive on royalties and interest should be technically adapted in the light of accession by new Member States. The necessary changes (listing, for each acceding State, of taxes and forms of companies covered by the directive) will be carried out according to a procedure set out in the act of accession.