Very Beneficial for EU Based Companies
Two of the most important EU Directives are the Parent Subsidiary Directive 90/435 and the Interest Directive 03/49. In the case of the former this allows a parent company located in another EU member state to receive dividends from a subsidiary company without being subject to any withholding taxes but of course after the payment of normal and appropriate domestic corporate taxes by the subsidiary company making the payment. In the case of Directive 03/49, this allows EU entities to issue loans and again receive interest on such loans without interest payments being subject to any interest related withholding taxes. What makes the aforementioned so powerful is that under the general rules relating to international law they will take precedence over any potentially conflicting domestic legislation even – it seems – in a country such as the UK which technically doesn’t have a constitutional court. It should be noted that using directives in tax planning doesn’t negate the benefit that may also exist by using ‘traditional’ tax treaties between countries.
Aggressive Tax Planning is Not Recommended
The SCF approach to tax planning is not to use EU directives and regulations in an aggressive manner such as trying to use domestic tax loopholes to eliminate tax liability but rather holistically create structures that are safe and long-term orientated. When SCF advises on any given structure we always look at matters primarily form a business and marketing perspective and then see how these primary objectives can be married with what is available both at an EU Level but also at an international tax treaty level. From our experience this holistic approach often allows for significant tax and business benefits but also ensures that potentially applicable anti-avoidance and controlled foreign company legislation is fully complied which allows for business certainty, which is just as important for growth as anything else.