A common withholding tax for the EU

Arjan Lejour, Maarten van't Riet

Research output: Online publication or Non-textual formWeb publication/siteProfessional


Corporate tax avoidance is high on the policy agenda. Government tax revenues are reduced by a few hundred billion euros according to various estimates due to the avoidance strategies of multinational companies. Both the multinationals firms and the countries facilitating these tax planning strategies have been brought into the spotlight. Also, various EU Member States have been labelled as tax havens. The multinational firms make use of differences in national tax systems, including differences in withholding taxes on dividend, interest and royalties on outgoing intra-firm income flows. This is called treaty shopping. The Parent-Subsidiary Directive (PSD) and the Interest and Royalty Directive (IRD) are used by multinationals firms to steer their income flows to the Member States with the lowest or zero withholding taxes. Both directives have been successfully implemented to facilitate cross border income flows within the internal market. However, the conditions of these directives are also used to reduce withholding tax payments on outgoing income flows from the EU.
Original languageEnglish
Media of outputOnline
Publication statusPublished - 4 Sept 2020


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