Non-Discrimination in European and Tax Treaty Law

I. S. 196Introduction

International economic double taxation is one of the major impediments to global development and the increase of foreign investments and, with specific reference to the European Union, it constitutes one of the main obstacles to the freedom of establishment and the free movement of capital. The two methods to relieve economic double taxation are the exemption method and the credit method. However, the general assumption that there is only one single exemption method and one single credit method is not accurate. For the purposes of this paper, the following analysis will focus on the two alternative methods to relieve economic double taxation of intercompany dividend distributions provided for by Article 4 of the Parent-Subsidiary Directive, i.e. the exemption method and the underlying tax credit method, which provides resident shareholders with a credit for foreign taxes paid by the distributing company on the profits out of which the dividend is paid. In particular, the paper will discuss to what extent the exemption method and the underlying tax credit method may be considered equivalent, with specific reference to cross-border intercompany dividend distributions w...