On 20 June 2014, the EU Economic and Financial Affairs Council reached agreement on modifying the EU Parent-Subsidiary Directive. The agreement proceeds with the prevention of double non-taxation via the use of hybrid financing arrangements, while agreeing to work separately on an amended General Anti-Avoidance Rule (GAAR). Links to the current EU Parent Subsidiary Directive (2011/96/EU), a PwC Tax Alert summarizing the proposal and the EU proposals are included for reference:
The amendment is limited to the 28 Member States of the EU, with a similar proposal envisioned in the OECD BEPS initiative. It is interesting to note the OECD BEPS provisions are being focused within the EU Community, in addition to the international OECD Guidelines. Timing for this EU proposal is for domestic legislative action by December 2015.
Re: Best Practices, it is prudent to review the EU legal structure for such hybrid arrangements to quantify the effect of this proposal, possibly requiring modification of hybrid debt and/or legal entities. Additionally, such hybrid instruments in non-EU countries should be noted for the forthcoming OECD BEPS corollary provision.