CELEX: 51990PC0571
Language: en
Date: 1991-01-24
Title: PROPOSAL FOR A COUNCIL DIRECTIVE ON A COMMON SYSTEM OF TAXATION APPLICABLE TO INTEREST AND ROYALTY PAYMENTS MADE BETWEEN PARENT COMPANIES AND SUBSIDIARIES IN DIFFERENT MEMBER STATES

No C 53/26                                Official Journal of the European Communities                                       28. 2 . 91
              Proposal for a Council Directive on a common system of taxation applicable to interest and royalty
                   payments made between parent companies and subsidiaries in different Member States
                                                        COM(90) 571 final
                                       (Submitted by the Commission on 6 December 1990)
                                                           (91/C 53/02)
T H E COUNCIL O F T H E E U R O P E A N COMMUNITIES,                 HAS A D O P T E D THIS DIRECTIVE:
Having regard t o the Treaty establishing the European                                            Article 1
Economic Community, and in particular Article 100
thereof,                                                             Member States shall exempt from any withholding tax
                                                                     interest and royalty payments made between parent
                                                                     companies and subsidiaries in different Member States.
Having regard t o the proposal from the Commission,
Having regard t o the opinion of the European Parliament,                                         Article 2
                                                                     For the purposes of this Directive:
Having regard t o the opinion of the Economic and Social             (a) 'interest' means income from debt-claims of every kind,
Committee,                                                                whether or not carrying a right t o participate in the
                                                                          debtor's profits, including premiums and prizes
                                                                          attaching to bonds or debentures;
Whereas, in a common market having the characteristics of a
domestic market, transactions between companies in                   (b) 'royalties' means payments of any kind received as a
different Member States must not be subject t o less                      consideration for the use of, or the right t o use, any
favourable tax conditions than those applicable t o the same              copyright of literary, artistic or scientific work including
transactions carried out between companies in the same                    cinematograph films, any patent, trade mark, design or
Member State;                                                             model, plan, secret formula or process, or for the use of,
                                                                          or the right t o use, industrial, commercial, or scientific
                                                                          equipment, or for information concerning industrial,
Whereas this requirement is not currently met as regards                  commercial or scientific experience.
interest and royalty payments; whereas national tax laws
coupled, where applicable, with bilateral agreements d o not
ensure complete elimination of double taxation, and whereas
                                                                                                  Article 3
their application entails administrative formalities and
cash-position problems for the companies concerned;
                                                                     For the purposes of this Directive, 'company of a Member
                                                                     State' means any company which:
Whereas abolition of all withholding taxes on interest and           (a) takes one of the forms listed in the Annex hereto;
royalty payments is the most appropriate means of
eliminating such formalities and problems and of ensuring            (b) according t o the tax laws of a Member State, is
equality of tax treatment as between national and                         considered t o be resident in that State for tax purposes
transnational transactions; whereas it is necessary, initially,           and, under the terms of a double taxation agreement
to abolish withholding tax in respect of such payments of                 concluded with a third State, is not considered t o be
special1 importance made between parent companies and                     resident for tax purposes outside the Community;
subsidiaries; whereas the arrangements should not apply
                                                                     (c) is subject t o one of the following taxes, without the
Cinder certain conditions where the payment is made t o a
                                                                          possibility of an option or of bfein'g exempt in respect of
permanent establishment of the recipient company located in
                                                                          the income covered by this Directive:
the Member State of the debtor; whereas Greece and
Portugal should, for budgetary reasons, be authorized to                  — impot des           societes/vennotschapsbelasting        in
retain a withholding tax temporarily;                                         Belgium,
                                                                          — selskabsskat in Denmark,
                                                                          — Korperschaftsteuer in the Federal Republic of
Whereas it is necessary t o ensure that interest and royalty
payments are actually taxed; whereas it is therefore necessary                Germany,
t o permit Member States t o take the appropriate measures to             — (popo         Eico8f|naTo<;       voniKtfov     Ttpoowncov
combat fraud or abuse,                                                        KEp8ooKoniKoO xapaKtripa in Greece,
 ---pagebreak--- 28. 2. 91                                Official Journal of the European Communities                                  N o C 53/27
     — impuesto sobre sociedades in Spain,                          Subject to the existing, bilateral agreements concluded
     — impot sur les societes in France,                            between Greece or Portugal and a Member State, the rate of
                                                                    this withholding tax may not exceed 1 0 % during the first
     — corporation tax in Ireland,                                  five years and 5 % during the last two years of that
     — imposta sul reddito delle persone giuridiche in              period.
          Italy,
     — impot sur le          revenu    des    collectivites in      Before the end of the seventh year, the Council shall decide
          Luxembourg,                                               unanimously, on a proposal from the Commission, on a
                                                                    possible extension of the provisions of this Article.
     — vennotschapsbelasting in the Netherlands,
     — imposte sobre o rendimento das pessoas colectivas in
          Portugal,                                                                                         v
                                                                                               Article 6
     — corporation tax in the United Kingdom,
                                                                    The provisions of this Directive shall apply to interest and
     or to any other tax which may be substituted for any of
                                                                    royalty payments made to a permanent establishment of the
     the above taxes.
                                                                    recipient company located in the Member State of the debtor
                                                                    company only if that Member State does not apply
                                                                    withholding tax to payments of the kind made between
                           Article 4                                resident parent companies and subsidiaries.
1.     For the purposes of this Directive:
(a) the status of parent company shall be attributed at least                                  Article 7
     to any company in a Member State which fulfils the
     conditions set out in Article 3 and has a minimum              This Directive shall not preclude the application of domestic
     holding of 25 % in the capital of a company in another         or agreement-based provisions required for the prevention of
     Member State fulfilling the same conditions;                   fraud or abuse.
(b) 'subsidiary' means that company the capital of which
      includes the holding referred to in (a).
                                                                                               Article 8
2.      By way of derogation from paragraph 1, Member
States shall have the option of:                                    1.    Member States shall bring into force the laws,
                                                                    regulations and administrative provisions necessary to
— replacing, by means of bilateral agreement, the criterion         comply with this Directive before 1 January 1993.
    of a capital holding by that of a holding of voting
    rights,                                                         They shall immediately inform the Commission thereof.
— not applying this Directive to companies in their
    countries which do not retain, for an uninterrupted             When Member States adopt these measures, these shall
    period of at least two years, holdings qualifying them as       contain a reference to this Directive or shall be accompanied
    parent companies, or to those companies in their                by such reference at the time of their official publication. The
    countries in which a company in another Member State            procedure for such reference shall be adopted by Member
    does not retain such a holding for an uninterrupted             States.
    period of at least two years.
                                                                    2.    Member States shall ensure that the texts of the main
                                                                    provisions of national law which they adopt in the field
                                                                    covered by this Directive are communicated to the
                           Article 5                                Commission.
Notwithstanding Article 1, Greece and Portugal may levy a
withholding tax on interest and royalty payments made by
subsidiaries to parent companies in other Member States                                        Article 9
until a date not later than the end of the seventh year
following the date of application of this Directive.                This Directive is addressed to the Member States.
 ---pagebreak--- N o C 53/28                               Official Journal of the European Communities                                         28. 2. 91
                                                                ANNEX
                                           List of forms of companies referred to in Article 3
            (a) companies under Belgian law known as 'societe anonyme'/'naamloze vennootschap', 'society en commandite
                par actions'/'commanditaire vennootschap op aandelen', 'societe privee a responsabilit£ limit^e'/'besloten
                vennootschap met beperkte aansprakelijkheid' and those public-law bodies that operate under private
                law;
            (b) companies under Danish law known as: 'aktieselskab', 'anpartsselskab';
            (c) companies under German law known as: 'Aktiengesellschaft', 'Kommanditgesellschaft auf Aktien',
                'Gesellschaft mit beschrankter Haftung', ,'bergrechtliche Gewerkschaft';
                                                                                                         i
            (d) companies under Greek law known as: 'avcbvu^ri Exaipeia';
            (e) companies under Spanish law known as: 'sociedad an6nima', 'sociedad comanditaria por acciones', 'sociedad
                de reponsabilidad limitada' and those public-law bodies which operate under private law;
            (f) companies under French law known as 'soci£t6 anonyme', 'society en commandite par actions', 'soci6t£ a
                responsabilit£ limitde' and industrial and commercial public establishments and undertakings;
            (g) the companies in Irish law known as 'companies incorporated under Irish law', 'registered building societies',
                and 'registered industrial and provident societies';
            (h) companies under Italian law known as 'society per azioni', 'societa in accomandita per azioni', 'societk a
                responsabilit^ limitata', and public and private entities carrying on industrial and commercial activities;
            (i) companies under Luxembourg law known as 'soci£t6 anonyme', 'society en commandite par actions', 'society &
                responsabilit6 limine';
            (j) companies under Dutch law known as: 'naamloze vennotschap', 'besloten vennootschap met beperkte
                aansprakelijkheid';
            (k) commercial companies or civil-law companies having a commercial form, cooperatives and public
                undertakings incorporated in accordance with Portuguese law;
            (1) companies incorporated under the law of the United Kingdom.
 ---pagebreak--- 28. 2. 91                                          Official Journal of the European Communities                                              N o C 53/29
                                                             Withholding tax rates on royalties ( J )
                                                                   Situation on 1 July 1990
                                                                                                                                                 (in percent)
                Residence State
                  of the debtor                                                                             Luxem­   Nether­                        United
                                  Belgium Denmark      Spain      France      Greece       Ireland   Italy             lands  Portugal Germany
Residence State                                                                                              bourg                                 Kingdom
of the beneficiary
Country without
                                     10     30         25          33V 3       25           30        21     12          0       15         25        25
t a x treaty
Belgium                              —        0          5           0           5            0          5     0         0        5     .     0         0
Denmark                                0      —    •     6           0         25 H           0          5     0         0       10           0         0
                                                                                     2            2
Spain                                  5      6        —             6         25 ( )       30 ( )      4    10          0        5           5       10
France                                 0      0          6         —             5            0         0      0         0        5           0         0
                                                 2           2                                                                        2
Greece                                 5    30 ( )     25 ( )        5         —            30 H        0    12 H        0       15 ( )       0         0
                                                             2                       2                                                2
Ireland                                0      0        25 ( )        0         25 ( )       —           0      0         0       15 ( )       0         0
Italy                                  5      5          8           0           0            0        —     10          0      12            0         8
                                                                                     2                                                 2
Luxembourg                             0      0        10            0         25 ( )         0        10    —           0      15 ( )        5         5
                                                                                                                                      2
Netherlands                            0      0          6           0           7            0         0      0       —         15 ( )       0         0
                                                                                     2            2                2        2
Portugal                               5     10          5           5         25 ( )       30 ( )     12    12 ( )      0( )   —           10          5
Germany                               0       0          5           0       - 0              0         0      5         0      10          —           0
United Kingdom                         0      0      • 10            0           0            0         0      5         0        5           0       —
(') The possible value added tax applied is not included in these rates.
(2) No tax treaty.
                       Withholding tax rates o n ordinary interest payments by a non-resident subsidiary to its parent company
                                                                   Situation o n 1 July 1990
                                                                                                                                                 (in percent)
           , Residence State
         ^ \ o f the debtor                                                                                Luxem­    Nether­                        United
                                Belgium  Denmark     Spain       France   Greece (')     Ireland    Italy                     Portugal Germany
Residence State                                                                                             bourg     lands                        Kingdom
of the beneficiary
Country without
                                  10        0        25              0       46           30         30       0         0       20           0        25
tax treaty
Belgium                           —        0         15              0       15           15         15       0         0       15           0        15
                                                                                   2
Denmark                           10       —         10              0       46 ( )         0        15       0         0       15           0          0
                                                                                   2            2
Spain                             10       0         —               0       46 ( )       30 ( )     12       0         0       15           0        12
France                            10       0         10             —        10             0        15       0         0       12           0          0
                                               2           2                                    2                2                   2
Greece                            10       0( )      25 ( )         0        —            30 ( )     10       0( )      0       20 ( )       0          0
                                                           2                       2                                                  2
Ireland                           10       0         25 ( )         0       46 ( )        —          10       0         0       20 ( )       0          0
Italy                             10       0         12             0        10           10         —        0         0       15           0        10
                                                                                   2                                                 2
Luxembourg                        10       0         10             0       46 ( )          0        10       —         0      -20 ( )    • 0           0
                                                                                                                                      2
Netherlands                         0      0         10             0        10             0        15       0         —       20 ( )       0          0
                                                                                   2            2                2         2
Portugal                          10       0         15             0     ' 46 ( )        30 ( )     15       0( )      0( )    —            0        10
Germany                           10       0         10             0        10             0          0      0         0       15          —           0
United Kingdom                    10        0        12         .    0         0       .     0       15       0         0       10 •         0        —       .
(') Moreover, 2 , 4 % stamp duty withheld from interest other than interest o n bonds and bank deposits.
( 2 ) N o tax treaty.