The New De Minimis Anti-Abuse Rule in the Parent-Subsidiary Directive: Validating EU Tax Competition and Corporate Tax Avoidance?
43 Intertax 8/9, 2015
14 Pages Posted: 7 Mar 2016 Last revised: 11 Mar 2016
Date Written: August 1, 2015
In this study, the authors propose that the 2014 amendment to the EU Parent-Subsidiary Directive (which introduces a new minimum ‘anti-abuse’ rule) effectively sets a standard definition of abuse under EU law that would only curb ‘wholly artificial arrangements’ and likely fosters tax avoidance, in spite of the express intent of the Directive to allow Member States to adopt stricter norms. The study explores hypothetical fact patterns to illustrate multiple instances of seemingly abusive or artificial structures, or functionally thin interposed entities, that could be deemed valid under the terms of the amended directive by one state and trigger disproportionate tax relief in other states irrespective of their national tax policies, thus fostering tax competition and base erosion within Europe, particularly in fact patterns wherein third-country capital is (re)invested in the EU/EEA. Furthermore, this study discusses whether fundamental principles of primary EU law would systematically and coherently condone such result.
Keywords: parent subsidiary directive; anti-abuse rule; GAAR
JEL Classification: H20; K34
Suggested Citation: Suggested Citation