Volume 47 (2019) / Issue 6/7

Satenik Melkonyan, Filip Schade, 'Flow-Through Holding Companies in Light of the Parent-Subsidiary Directive: The Thin Line between Tax Planning and Tax Abuse' (2019) 47 Intertax, Issue 6/7, pp. 590–608


The fight against aggressive tax planning has become a global priority in recent years. On the initiative of the OECD and, particularly, through implementations at the EU level, many loopholes have been closed. However, as the current developments in this field show, no politically acceptable level of taxation of multinationals is in sight. This article scrutinizes a tax structuring technique which can – even in the post-Base Erosion and Profit Shifting (BEPS) era – lead to unfavourable results from a fiscal perspective. First, the disputed tax planning scheme is described (section 2). In particular, the authors show that by using partially tax-exempt companies under Article 2(a)(iii) of the Parent-Subsidiary Directive as flowthrough holding companies, the general partner of the latter can achieve a fully tax-free repatriation of profits within the EU. Subsequently, the article addresses the question as to whether this result can be tackled by currently available legal anti-abuse means (section 3). The authors’ findings suggest that the taxpayer-friendly settled case law of the EU Court of Justice (ECJ) makes it almost impossible for current anti-abuse rules to cover this technique. Finally, the authors recommend that the personal scope of the Parent-Subsidiary Directive be limited, which should provide an effective solution for such structures, while also being suitable for political consensus among the Member States (section 4).

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ISSN: 0165-2826
ID: TAXI2019059