Council proposes a Directive on the common system of taxation applicable to certain company operations

Current news from the European Union
published on Monday, August 04, 2008 under Economic & Financial Affairs
Following the codification strategy decided by the Commission in April 1987, the Council has proposed a Council Directive on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different Member States and to the transfer of the registered office of an SE or SCE between Member States.
The purpose of this proposal is to undertake a codification of Council Directive 90/434/EEC of July 23rd 1990, on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different Member States and to the transfer of the registered office, of an SE or SCE, between Member States. The new Directive will replace the various acts incorporated in it, bringing together the acts being codified with only the formal amendments required by the codification exercise itself.

Codification was agreed as the general procedure to clarify Community law and make it closer to EU cirtizens. The Commission decided in 1987 that all legislative acts should be codified after no more than ten amendments, stressing that this is a minimum requirement and that departments should endeavour to codify at even shorter intervals the texts for which they are responsible, to ensure that the Community rules are clear and readily understandable. This position was supported by the Conclusions of the Presidency of the Edinburgh European Council, in December 1992.

The Directive will therefore be applied by Member States to:

Mergers, divisions, partial divisions, transfers of assets and exchanges of shares involving companies from two or more Member States, and;
Transfers of the registered office from one Member State to another Member State of a European company (Societas Europaea or SE), as established in Council Regulation (EC) No 2157/2001, and a European Cooperative Society (SCE), as established in Council Regulation (EC) No 1435/2003.
The Directive clarifies the definitions for such company operations, establishing the rules applicable to them for the taxation of capital gains, the exemptions that may be applied, as well as certain situations such as a company having a holding in the capital of the transferring company and the cases for Member States derogations.

The Directive also sets the taxation rules applying for special cases of transfer of a permanent establishment and the cases of transparent entities.

In general, as final provisions, the Directive sets that a Member State may refuse to apply or withdraw the benefit of all or any part of the provisions of the Directive where it appears that the operations has as its principal objective or as one of its principal objectives tax evasion or tax avoidance, or if the operation results in a company, whether participating in the operation or not, no longer fulfilling the necessary conditions for the representation of employees on company organs according to the arrangements which were in force prior to that operation.

Member States will be obliged to communicate to the Commission the texts of the main provisions of national law which they adopt in the field covered by this Directive.

Once the new text of the Directive will be approved and published in the Official Journal of the European Union, it will enter into force on the twentieth day following this publication.