ARCHIVES HISTORIQUES 
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COM (85) 360 
 
 
 
Vol. 1985/01 43 
  
 
Disclaimer  
Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlem ent. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the openi ng to the public of the historical archives of the European Econom ic 
Community and the European Atomic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
27.9.2003, p. 1), this f ile is open to the public. Where necessary, classified documents in this 
file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februar 198 3 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
(ABI. L 243 vom 27 .9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
der genannten Verordnung freigegeben.  
COMMISSION OF THE EUROPEAN COMMUNITIES
C O M (85) 360 final  
Brussels, 5  July 1985
FISCAL MEASURES AIMED AT ENCOURAGING COOPERATION  
BETWEEN UNDERTAKINGS OF DIFFERENT MEMBER STATES
C0MC85) 360 final

«•Frl-SC'ALr ,.MEASURES  AIMED AT ENCOURAGING COOPERATION
between Undertakings  of different member states
C o m m u n i cation from the Commission to the Council
O n  17 January 1984, Vice-president T U G E N D H A T  sent to the Council a  
communication (1) which stressed the need to establish without delay  
the tax conditions for increased cooperation between undertakings  
across intra-Community frontiers and, to that end, to adopt, the  
following three proposals for directives :
-  the co m m o n  -tax arrangements applicable to mergers, divisions and  
contribution of assets occurring between companies of different  
Mem ber States ;
-  the co m m o n  tax arrangements applicable to parent companies and  
subsidiaries of different M em ber States ;
-  the elimination of double taxation in the case of adjustment of  
profits between associated enterprises (arbitration procedure).
At its meeting on 12 March 1984, the Council agreed that p rio rity  should  
be given to the examination of these proposals and requested the  
Permanent Representatives Committee to report to it  before 31 M ay  
1984.
The active examination by C O R E P E R  has enabled agreement to be reached on  
a ll the main provisions of th$ three texts with the exception of four  
points, which were submitted for a  decision to the Council at its  
meeting on 4 June 1984 (2). These points concern :
Doc. SEC(84)77
Doc. 7444/84 FISC 53 of 26 M ay 1984.

2 .-
1) the problem raised, in the framework of the "Mergers" directive,  
by the system of joint management applied in Germany ;
2) the inclusion, in the scope of the sam e directive, of exchanges of  
shares ;
3) the authorization for Germany to continue to levy a  withholding  
tax on dividends distributed to parent companies in other M em ber  
States ;
4) the jurisdiction of the Court of Justice if  the arbitration  
procedure for the elimination of double taxation is enacted by  
m eans of a  convention between M em ber States, on the basis of  
Article 220 of the E E C  Treaty.
The compromise arrangement(1) proposed by the French presidency at  
the Council session on 4 June 1984 w as in general well accepted by  
the delegations, but lack of agreement on point 3 above (withholding  
tax) prevented its formal adoption, the Netherlands and Germany having  
very differing views on the subject.
3. The Council has on several occasions asked the Commission to look for
a way to overcome this disagreement, particularly by m eans of bilateral  
contacts with the two delegations mainly concerned.
These talks failed to produce agreement. In these circumstances, it is  
considered that the time has n o w  co m e for the Council to face up to its  
responsabilisés and to achieve the objective it set its e lf on 12 March  
1984. The remaining matter in issue could be settled by balanced  
concessions to be m ade by two sides. The following provisions seem  to  
meet the situation :
1) the Germ an withholding tax not to exceed 10%  ;
2) the M em ber States which at present apply a  withholding tax on  
dividends paid out to Germany would reduce it  in proportion to
(1) Doc. 7676/84-FISC 57 of 4 June 1984.

the reduction of the withholding tax levied on dividends paid out 
to them by Germ any ; the rate would not however exceed 5% .
It  is also proposed to provide in the directive a  clause dealing with  
the situation which would result from a reduction of the present  
difference between the two corporation tax rates applied by Germany.
Lastly it  is proposed to specify the conditions on which the deroga­
tion provided for Greece w ill be applied.
The new  text of article 5  of the directive as it results from these  
various modifications, and the statements for the Council minutes  
concerning this article are set out in annex I and annex I I  respectively
All the other elements of the presidency compromise mentioned in  
doc. 7676/84 - FISC 57 would remain the same.
The compromise n o w  proposed should allow the Council to take action,  
m ore than sixteen years after the presentation of the firs t two taxation  
proposals of the Commission on cross-border cooperation between  
undertakings, upon measures recognized as an essential element in the  
establishment of the internal market. Not only is this solution balanced  
but it  is also easy to put into operation and it  does not impose on any  
M em ber State significant budgetary sacrifices. Its speedy adoption by  
the Council would be a  good expression of p o litic a l determination to  
m ake progress in the completion of the internal market.

ANNEX I
Arti.cj.e_5
Profits which a  subsidiary distributes to its parent com pany shall, at  
least where the latter holds a  m inim um  share of 25 7. in the capital of  
the subsidiary, be exempted from withholding tax.
Notwithstanding paragraph 1, the Republic of Greece may, for so long as  
it  does not impose any corporation tax on distributed p ro fits , levy a  
withholding tax on dividend payments to parent companies situated in  
other M em ber States. However, the rate of this withholding tax must not  
exceed the rate provided in the double taxation conventions.
Notwithstanding paragraph 1, the Federal Republic of Germany may, for as  
long as it  charges corporation tax on distributed profits at a rate at  
least 20 points lower than the rate applicable to non-distributed  
p ro fits , impose a  compensatory withholding tax at a rate not exceeding  
10%  on the profits distributed by the subsidiary companies of that  
State.
If  the difference between the two corporation tax rates is reduced, to  
less than the figure of 20, referred to in the preceding su b p arag rap h  this  
withholding tax w ill be lowered in the sam e proportion.
M em ber States which, at the date of application of this Directive, apply  
a withholding tax to dividends paid out to parent companies situated in  
the Federal Republic of Germany m ay maintain such tax. They shall,  
however, reduce the rate of this tax in proportion to the reduction  
granted in their favour by the Federal Republic of Germany so as to  
comply with the above provisions. The rate m ay not however exceed 5% .
The Commission shall present to the Council periodically and for the  
fir s t time before the end of the fifth  year following the date of  
application of this Directive, a report on the application of the  
provisions of paragraphs 3 and 4 accompanied, if  necessary, by a  
proposal for a modification of these provisions.

ANNEXII
Statements for the Council minutes  
Re Article 5
"The Federal Republic of Germany undertakes to extend to the  
other Member States any reduction in the rate of withholding tax  
which it grants to third countries".
"The Council asks Member States to supply the following informa­
tion to the Commission so as to enable it to draw up the report  
referred to in paragraph 5 :
the amount of dividends distributed by German subsidiaries  
of parent companies belonging to other Member States;
the percentage of these dividends redistributed by parent  
companies to recipients other than parent companies, es­
tablished on a proportional basis".