Official Journal of the European Union

C 112/113

Opinion of the European Economic and Social Committee on the ‘proposal for a Council Directive amending Directive 2003/49/EC on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States’

(COM(2003) 841 final – 2003/0331 (CNS))

(2004/C 112/28)

On 2 February 2004, the Commission decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Committee decided to instruct the Section for Economic and Monetary Union and Economic and Social Cohesion to undertake the preparatory work.

In view of the urgent nature of the work, the Committee decided at its 407th plenary session of 1 April 2004 to appoint Mr Burani as rapporteur-general and adopted the following opinion unanimously:

1.   Introduction


On 3 June 2003, the Economic and Financial Affairs Council adopted Directive 2003/49/EC on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States, as part of the so-called Tax Package. When the directive was adopted, the Council stipulated in a statement for entry in the minutes that ‘the benefits of the … Directive should not accrue to companies that are exempt from tax on income covered by this Directive’, and authorised the Commission to take the appropriate precautionary measures.


Moreover, the Commission had already specified that ‘it is necessary to ensure that interest and royalty payments are subject to tax once in a Member State’. In short, the directive, as supplemented by the amendments now being proposed, seeks to prevent loopholes in the legislation which provide opportunities for tax evasion in the case of interest and royalties payments between associated companies of different Member States.


To place this proposal in context, it should be remembered that the Commission has already presented two proposals identifying possible remedies to the restrictions imposed by direct taxation on cross-border economic activities in the single market:

the first proposal, amending Directive 90/435/EEC of 23 July 1990, concerns the common system of taxation applicable in the case of parent companies and subsidiaries (1);

the second proposal, amending Directive 90/434/EEC of 23 July 1990, concerns the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States (2).


The introduction to the proposal states (although this is obvious) that the European Company, whose Statute will enter into force on 8 October 2004, is henceforth to be included in the list of companies which will be covered by the directive.


European cooperatives, which will be able to receive the benefits of the new legal Statute for a European Cooperative Society (SCE) from 2006 onwards, will also be covered by the directive: they will receive the same treatment as cooperatives in the Member State of their registered office.



Article 1(1) of the proposal amends the corresponding Article 1(1) of the existing directive, introducing a proviso which was not there before: interest and royalties paid to an associated company are to be exempt from tax if they are subject to tax in the Member State in which the receiving company is situated. The EESC endorses this, but wonders whether the need to monitor compliance with this condition might place an excessive burden on the tax authorities of the source state, which will be required to verify whether the beneficial owner is effectively subject to tax and whether it has fulfilled its tax obligations.


Article 1(2) replaces the annex to the existing directive, which briefly listed the different types of companies in the language of each country, with a much more detailed list which includes the European Company (SE) and the European Cooperative Society (SCE) as well. This list has the merit of being clearer and of removing some ambiguity where certain countries are concerned but, apart from these necessary improvements, it does not essentially add anything new.


Article 2 contains the implementing provisions. The Member States are to comply with the directive by 31 December 2004, bringing into force all the laws, regulations and administrative provisions necessary; they are also to forward to the Commission the text of the provisions and a correlation table between the provisions and the directive. The EESC points out that, in view of the amount of time required, particularly in certain Member States, for Community provisions to be translated into national legislation, the deadline set would seem to be rather short. Given that the directive is to enter into force in all Member States simultaneously, it may be that the deadline needs to be extended by six months or more.

3.   Conclusions


The EESC fully endorses the aim of the directive, which is part of a process of gradual fine-tuning of taxation provisions intended to avoid both tax evasion and double taxation. The directive should also indirectly facilitate harmonisation of taxation systems in the future and help to eliminate distortion of competition, which is currently all too apparent.

Brussels, 1 April 2004

The President

of the European Economic and Social Committee


(1)  EESC opinion, OJ C 32 of 5.2.2004, p. 118.

(2)  EESC opinion CESE 312/2004 of 25.2.2004.