European Commission Proposal to Tackle Corporate Tax Avoidance

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Of the four main issues outlined by President José Manuel Barroso and Herman Van Rompuy ahead of the G20 summit, focus on tax avoidance and evasion was highlighted. This is being tackled by the Commission’s recent proposed amendments to key EU corporate tax legislation, which are forecasted to be implemented by Member States by the 31st of December 2014.

The Parent-Subsidiary Directive was originally put forward to safeguard same-group companies, based in various Member States, from double taxation. However, through particular exploitation of loopholes within the directive, this was allowing leeway for companies to abuse of it and benefit from a situation of double non-taxation.

The new proposal aims at having this rectified by basing itself on two main elements. Firstly, through updating anti-abuse provisions in the original Directive and secondly, by ensuring that particular tax planning arrangements, which were previously exploited, will no longer remain eligible for tax exemptions.

The spirit of the Commission’s proposal can be summed up in the words of the European Commissioner for taxation, Algirdas Šemeta, who said that “EU tax policy is heavily focused on creating a better environment for businesses in the EU. This means breaking down tax barriers and tackling cross-border problems such as double taxation. But when our rules are abused to avoid paying any tax at all, then we need to adjust them. Today’s proposal will ensure that the spirit, as well as the letter, of our law is respected. As such, it will ensure greater revenues for national budgets and fairer competition for our businesses.”

For more information and restructuring opportunities via Malta contact Dr. Jonathan De Giovanni, Director of Legal and International Tax