The New De Minimis Anti-abuse Rule in the Parent-Subsidiary Directive: Validating EU Tax Competition and Corporate Tax Avoidance?

Abstract

In this study, the authors propose that the 2014 amendment to the EU Parent-Subsidiary Directive (which introduces a new minimum ‘anti-abuse’ rule) effectively sets a standard definition of abuse under EU law that would only curb ‘wholly artificial arrangements’ and likely fosters tax avoidance, in spite of the express intent of the Directive to allow Member States to adopt stricter norms. The study explores hypothetical fact patterns to illustrate multiple instances of seemingly abusive or artificial structures, or functionally thin interposed entities, that could be deemed valid under the terms of the amended directive by one state and trigger disproportionate tax relief in other states irrespective of their national tax policies, thus fostering tax competition and base erosion within Europe, particularly in fact patterns wherein third-country capital is (re)invested in the EU/ EEA. Furthermore, this study discusses whether fundamental principles of primary EU law would systematically and coherently condone such result.