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
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.