1. 1 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 1 EU Taxation 4. Parent-Subsidiary Directive Arvind Ashta ESC Dijon: Pole Finance

2. 2 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 2 Points of Taxation France Subsidiary GermanyDenmark Parent Shareholders Dividend TAX POINTS of TAXATION

3. 3 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 3 Full Exemption on Dividend Paid: domestic shareholders

4. 4 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 4 Full Exemption on Dividend Paid: foreign shareholders

5. 5 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 5 Withholding Taxes on dividends distributed to foreigners

6. 6 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 6 Parent-Subsidiary directive Such withholding taxes are no longer allowed if –EU Parent holds 25% of EU subsidiary However, no relief for –Parents holding < 25% –Individual shareholders –Foreign (non-EU) parents This therefore affects countries with full or partial relief for dividends at corporate level.

7. 7 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 7 Reminder: Final Withholding tax on (all) dividends (shareholder level relief) Even this system must ensure that EU parents with 25% do not get taxed!

8. 8 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 8 In the hands of the parent The State of the parent company should not tax a second time Must provide relief –either by exemption method –or credit method

9. 9 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 9 Income Exemption: individuals

10. 10 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 10 Income Exemption on dividends

11. 11 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 11 Tax Credit Method: Individuals

12. 12 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 12 Tax Credit Method on dividends distributed abroad

13. 13 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 13 Tax Credit Method for Corporate and Withholding Taxes

14. 14 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 14 Table 10 is a UK example Study it later

15. 15 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 15 Advance tax v. Withholding tax Précompte = advance tax = imputation tax = equalization tax. Précompte mobilier = withholding tax = retenue à la source. Imputation credit = dividend franking credit = avoir fiscal.

16. 16 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 16 Imputation Credits

17. 17 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 17 Non-taxable income and Imputation Credits

18. 18 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 18 Imputation Taxes offset credits

19. 19 ESC-Dijon- Pole Finance – EU Tax – A. Ashta 19 Imputation taxes allowed The imputation taxes have been allowed! Conclusion: For EU parents 25% of EU subsidiary –1. Withholding taxes not allowed –2. Imputation taxes allowed –3. Double taxation relief has to be given