Dieter Endres, PwC The anti-treaty (and anti-directive) shopping rule in force for the past few years refused treaty relief from withholding tax to foreign companies held by persons who would not have been entitled to the relief, had they received the income in their own names, if the arrangement was considered abusive. Abuse was assumed if either there was no business or other good reason for interposing the foreign company, or the foreign company earned no more than 10% of its gross income from its own business activity, or it did not maintain an appropriate establishment for its business activity. This rule has come in for criticism from various quarters, mostly because it can disqualify European holding company and other structures generally seen as fair and reasonable. Particularly this latter point prompted the European Commission to open infringement proceedings against Germany.
February 01 2012
