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EU Cracking Down on Abuse of Parent-Subsidiary Rules

Roberta Holland | January 28, 2015

The Council of the European Union is targeting corporate tax avoidance by adding a binding anti-abuse clause to the EU’s parent-subsidiary directive.

This week the council’s Economic and Financial Affairs Council (Ecofin) approved the amendment to the directive in an attempt to stop the 2011 regulation from being misused by corporate groups seeking to avoid taxes by shifting profits between subsidiaries. The rule initially was designed to prevent corporations doing cross-border business from being taxed twice by different member states. It prevented member states from taxing profits received by parent companies from subsidiaries in other member states.

Artificial shifting of profits to lower or no-tax regimes was already a hot-button issue globally, but in November the so-called LuxLeaks scandal erupted, with leaked evidence of hundreds of major corporations...

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