International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

EU: Political agreement on new EU rules on PPLs/hybrid loans


Bob van der Made

On April 14 2014, the Council's High Level Working Party (HLWP) meeting discussed a Greek Council Presidency proposal for a split approach to the revision of the parent-subsidiary directive (2011/96/EU), which was proposed by the European Commission at the end of 2013. Under the proposed split, the PPLs/hybrid loans part of the proposed revised parent-subsidiary directive (PSD) would still be adopted in Council under the six-monthly rotating Greek EU Presidency, that is before June 30 2014. The relevant new Article 4(1)(a) of the PSD provides that where a parent company, by virtue of its association with its subsidiary, receives distributed profits, the member state of the parent company shall refrain from taxing such profits to the extent that such profits are not deductible by the subsidiary of the parent company. The PPLs/hybrids proposal follows the political guidance agreed in 2009 within the EU's Code of Conduct Group on business taxation and allows this political guidance to be implemented in domestic tax law. The agreed deadline for transposing changes to the PSD into the domestic legislation of all 28 member states is most probably December 31 2015.

The Commission's other main proposal for amending the PSD, a proposed new anti-abuse provision (or GAAR) which obliges EU member states to withdraw the benefits of the PSD for arrangements put in place for the purpose of obtaining a tax advantage under the PSD, would need to be discussed further under the split, however, also at technical level, under the incoming Italian EU Presidency.

This split would not have suspensive effect for the PPLs/hybrids proposal. There is EU legal precedent for such a pragmatic split proposal: last year's EU's VAT anti-fraud package.

It seems that the Commission is now no longer opposing the split, and EU member states' views seem to have converged further during the HLWP meeting held on April 14 2014. Political agreement is expected to be reached soon therefore, that is provided some smaller remaining problems for some member states and all internal processes can be solved.

The EU's 28 member states, the Commission and the EU Parliament are apparently quite keen to show the G20/OECD+ that the EU can actually reach concrete political progress and pass binding legislation on a very difficult BEPS-related issue such as hybrids.

Next steps

  • The EU-28 ambassadors of the permanent representations to the EU in Brussels will discuss the PSD PPLs/hybrids proposal on April 30 2014 in COREPER II (which prepares the ECOFIN Council meetings) and they are expected to reach political agreement.

  • EU finance ministers are subsequently set to have a political debate on the PSD on May 6 2014 in the ECOFIN Council on PPLs/hybrids, and it seems increasingly likely that the finance ministers will also cast a vote (unanimity required). Should May 6 2014 not be feasible, then June 20 2014 will be the next earliest indicative date for vote in ECOFIN.

Bob van der Made (


Tel: +31 88 792 3696


more across site & bottom lb ros

More from across our site

PwC publishes detailed accounts of its behaviour in the tax scandal in Australia, while another tax trial looms for pop star Shakira.
The winners of the ITR Europe, Middle East, and Africa Tax Awards 2023 have been announced!
The winners of the ITR Asia-Pacific Tax Awards 2023 have been announced!
Mauro Faggion appeared cautiously optimistic as the European Commission waits to see whether all 27 member states will accept its proposal.
The global minimum rate also won’t entirely stop a race to the bottom, according to a tax director speaking at an ITR conference in London.
The country’s tax authorities are not interested in seeing transfer pricing studies any more, it was claimed at an ITR industry conference in London.
The controversial measure is being watered down after criticism from the European Central Bank.
More than 600 such requests were made in 2022, while HMRC has also bolstered its fraud service, it has been revealed.
The General Court reverses its position taken four years ago, while the UN discusses tax policy in New York.
Discussion on amount B under the first part of the OECD's two-pronged approach to international tax reform is far from over, if the latest consultation is anything go by.