Written answers

Wednesday, 30 September 2015

Photo of Terence FlanaganTerence Flanagan (Dublin North East, Renua Ireland)
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85. To ask the Minister for Finance when legislation will be published to implement Council Directive 2014/86/EU of 8 July 2014, amending Directive 2011/96/EU, on the common system of taxation applicable in the case of parent companies and subsidiaries of different member states of the European Union; and if he will make a statement on the matter. [33602/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Council Directive 2011/96/EU (Parent-Subsidiary Directive) was adopted in order to facilitate the establishment and effective functioning of the common market. It aimed to prevent restrictions, disadvantages or distortions arising to EU group companies by removing double taxation in the case of profit distributions made by a subsidiary located in one Member State to its parent company located in another Member State.

The Parent-Subsidiary Directive (PSD) was amended by Council Directive 2014/86/EU to deal with, in the main, hybrid loan mismatches. This is where there is double non-taxation because one member state treats an instrument as debt and allows a payment to be treated as a tax deductible expense while the other Member State treats the instrument as equity and exempts the payment as a distribution qualifying for relief under the Parent-Subsidiary Directive (PSD). This aspect of the amendment, however, did not require transposition through legislative change in Ireland as we operate a system whereby relief is granted through a tax credit system rather than by way of an exemption from tax.

Council Directive 2014/86 EU also amended Annex 1 to Directive 2011/96/EU by amending the list of certain company types which come within the scope of the Directive. This change did not require an amendment to our legislation as the definition of 'the Directive' in section 831 Taxes Consolidation Act covered such an amendment.

As part of moves to tackle tax fraud and evasion, Member States agreed in January 2015  to further amend the PSD (Council Directive 2015/121) to include a General Anti-Avoidance Rule.

The amendment requires Member States to refrain from granting the benefits of the PSD to an arrangement, or a series of arrangements, that are not genuine and have been put in place to obtain a tax advantage which defeats the object or purpose of the PSD while not reflecting economic reality.

The deadline for Member States to transpose any amendments under Directive 2015/121 is 31 December 2015. It is my intention to bring forward the necessary amendments within the deadline set out in the Directive.

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