European Union Directives

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Parent/Subsidiary Directive (1) Distribution of dividends among companies with tax residence in diferent EU member states is exempt from withholding tax, under certain conditions namely:

. 1. They take one of the company forms stated in the Directive;

. 2. They are subject to corporate income tax;

. 3. The shareholder owns a minimum of 10% in the subsidiary for at least 1 year.

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Savings Directive Allows any income on savings, in the form of interest payments, received in a EU Member State by individuals with residency in another EU Member State to be taxed in the state of residency of the individual.

. The Directive also creates a regime of exchange of information between member states regarding those payments. Countries like Austria, Luxembourg and Switzerland are applying during the transition period a witholding tax.

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Place of Supply of Services Directive For all services supplied between EU Member States, the place of taxation should be where the actual consumption takes place or in case of a taxable person, the place where this person has established his business.

. Where a taxable person receives services from a person not established in the same EU Member State, the reverse charge mechanism should be obligatory in certain cases, meaning that the taxable person should self assess the appropriate amount of VAT on the

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Interest and Royalties Directive (1) The payment of interest and royalties between companies based in different EU Member States are exempt from withholding tax under certain circunstances, namely:

. 1. They take one of the company forms stated in the Directive;

. 2. They are subject to corporate income tax;

. 3.There is a minimum direct shareholding of at least 25% in the capital, or both companies are directly owned by a third company with a minimum shareholding of 25%.

. Portugal has the following transition period: 10% until 30 June 2009 and 5% until 30 June 2013.

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Merger Directive Mergers, spin-offs, transfers of assets and exchanges of shares between companies of different EU Member States, as well as the transfer of headquarters within the EU, can be made under a corporate tax neutrality regime, if the companies comply with:
. 1. They take one of the company forms stated in the Directive;
. 2. They are subject to corporate income tax;
. Under certain conditions, it is possible the transfer unused tax losses carried foward.
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Notes: (1) When this Directive is not applicable please revert to the conventions to avoid the double taxation