On 25 July 2014, a new EU Directive providing for significant changes to the Parent - Subsidiary Directive was published.

The Parent - Subsidiary Directive was implemented to eliminate tax obstacles for profit distribution between a parent company and its subsidiaries resident in different Member States by making dividends from subsidiary to parent company tax exempt in the parent Member State.

Although aimed at preventing double taxation, the exemption on dividend receipts can result in situations of double non taxation through the use of hybrid loan arrangements whereby the subsidiary in one Member State treats the transaction as a simple loan with the interest being tax deductible and the parent company treats it as a dividend receipt with such income being tax exempt.

Under the new Directive, profits distributed by a subsidiary to its parent company in another Member State will not be exempt from tax in the parent company Member State, to the extent that such profits are tax deductible by the subsidiary.

All Member States must implement this amendment by 31 December 2015.