Deloitte Tax & Legal Alert: The Parent-Subsidiary Directive has been amended

The European Union has adopted amendments to the Directive 2011/96/EU (i.e. the Parent-Subsidiary Directive) in order to prevent double non-taxation of dividends distributed within corporate groups and deriving from hybrid loan arrangements.

When planning intra-group financing, companies from differentMember States will be prevented from using hybrid loanarrangements for obtaining double non-taxation of the income derived as a result of these transactions.

Hybrid loan arrangements exploit mismatches between national tax rules. In this respect, distributed profits may be considered non-taxable in the parent company’s state of residency and a tax-deductible expense in the state of the subsidiary.

In addition, the list of companies to which the Parent-Subsidiary Directive applies has been amended by the addition of new types of companies from Poland and Romania (i.e. “spółka komandytowo-akcyjna” in Poland and “societati in nume colectiv” and “societati in comandita simpla” in Romania).

Member States must transpose these amendments into their national legislation by December 31, 2015.

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