The proposals for the EU Parent-Subsidiary Directive have been published, with a summary and KPMG review in this post.
Proposed amendments on 25 Nov., 2013
• Domestic law implementation
• Financial mismatches (PPL, hybrids, etc.)
Artificial arrangements: to gain improper tax advantages, and defeats object, spirit & purpose of tax provisions
• Compliance with Directive by 31 Dec. 2014
Determination of artificiality (one or more):
• Legal characterization, vs. legal substance, of individual steps
• Does not reflect economic reality
• Arrangement is not ordinarily used in reasonable business conduct
• Arrangement has offsetting or cancelling elements
• Transactions are circular in nature
• Arrangement results in a significant tax benefit which is not reflected in the business risks undertaken by the taxpayer
Click to access eu-nov25-2013.pdf
This proposal follows GAAR implementations by several countries in advance of the OECD BEPS Action Plan. This subjective anti-avoidance action should be followed, as other countries will also be examining the relevant wording and guidance therein.
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