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Taxation and Customs Union

Parent-Subsidiary Directive

An EU Directive regulating taxation on parent companies and their subsidiaries

Parent-Subsidiary

Directive

The Parent-Subsidiary Directive is an EU Directive designed to facilitate smooth functioning in the taxation of groups of companies across the EU. Its aims are to: 

  • exempt dividends and other profit distributions paid by subsidiary companies to their parent company from withholding taxes 
  • eliminate the double taxation of such income at the level of the parent company 

A parent company is a company from an EU Member State that has a minimum holding of 10% in the capital of a company from another Member State. 

The Directive is in force as of 17 February 2015.

Measures under the Directive

Anti-abuse rule

The 2015 amendment to the Directive adds anti-abuse rules to prevent misuse in terms of tax evasion, tax fraud or abusive practices. These rules are designed to tackle an arrangement or a series of arrangements which are not genuine, that is, which do not reflect economic reality.

Types of companies affected

The types of companies affected are public limited companies, private limited companies, certain cooperatives, mutual companies, savings banks, funds, European companies and European cooperative societies. 

These companies must not have their tax domicile outside the EU and must be subject to corporation tax without the possibility of an option and without being exempt. 

Documents and legal texts

  • Council Directive (EU) 2015/121 of 27 January 2015 amending Directive 2011/96/EU on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States 
  • Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States