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Last checked: 15/03/2019

Taxes on parent companies and subsidiaries

UK decision to invoke Article 50 of the TEU: More information

As of 30 March 2019, all EU law will cease to apply to the UK, unless a ratified withdrawal agreement establishes another date, or the European Council and the UK decide unanimously to extend the two-year negotiation period. For more information about the legal repercussions for businesses:

Cross-border profit distributions

If you have a parent company in one EU country and subsidiaries in another, you can eliminate possible tax issues (e.g. double taxation) on cross-border profit distributions between these companies.

This applies if:

Exemptions from withholding tax

Withholding tax can be levied on company profits in advance of a full tax declaration (after which it may be refunded, or indeed extra tax may be levied). For parent companies and their subsidiaries, distribution of profits can be exempted from withholding taxes. This works both ways:

This is the case both in the country of the subsidiary and in the country of the parent company, if both countries are in the EU.

Eliminating double taxation

Double taxation (simultaneous tax demands from more than one country) can occur if you don't follow the tax rules correctly. So to avoid double taxation on your profit distributions you should:

Hybrid loans – double non-taxation

Double non-taxation may occur if you treat payments on cross-border hybrid loans as:

To avoid this:

Which types of companies are covered by these rules?

In some cases it is up to the EU countries themselves to decide which companies are covered by these rules. To read more see the annex of the directive at the link in the references section below.

Related topics

EU legislation

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Local business support - Do you have questions on operating a business cross-border, for example exporting or expanding to another EU country? If so, the Enterprise Europe Network can give you free advice.

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