22nd June 2014

Tax loophole closed

At the ECOFIN Council meeting in Luxembourg on 20 June, the EU finance ministers agreed an amendment to the parent-subsidiary directive. The aim of the amendment is to put an end to misusing the so-called hybrid loan arrangements between parent and subsidiary across borders to avoid paying taxes. In some Member States, hybrid loan arrangements are regular loans, while in others they are regarded as equity and therefore are not subject to taxation. Using these differences, companies could avoid paying taxes by providing a hybrid load arrangement to their subsidiaries in different Member States. According to the amendment, the parent will be allowed to deduce the hybrid load from its taxes, if the subsidiary is not allowed to. Upon adoption by the Council the directive enters into force and will need to be transposed into national legislations by the end of 2015.

The eurozone ministers within the ECOFIN Council recommended to approve the adoption of the euro by Lithuania from 1 January 2015, following favorable convergence report by the Commission and by the ECB. The issue will now be discussed at the European Council later this week and the European Parliament will be asked for opinion. Afterwards, the Council will formally withdraw the Lithuanian derogation from the euro.

The ministers discussed also the draft EU budget for 2015, the country-specific recommendations as part of the European Semester procedure and canceled the excessive deficit procedure of Belgium, the Czech Republic, Slovakia, Denmark, the Netherlands and Austria.

For more, click here and here.

Members of the American Chamber of Commerce in the Czech Republic