European Community finance ministers agree on direct tax measures.

European Community Finance Ministers Agree on Direct Tax Measures

On July 23, 1990 the European Community's (EC) Council of Finance Ministers formally adopted three corporate tax directives. This action was the formal adoption of the political agreement reached on June 11, 1990. These directives, which have been a point of controversy for the past 21 years, are designed to eliminate the risks of double taxation on crossborder operations.

As more fully explained below, the package includes:

* The prohibition of member states from

imposing a withholding tax on profits

distributed by a subsidiary in its territory

to a parent company located in another

member state (the so-called parent-subsidiary

directive). * A delay in taxing capital gains when

mergers, spin-offs, and contributions of

assets occur that involve companies in

different member states. * The establishment of an arbitration panel

to settle conflicts between tax authorities

over the double taxation for a specific

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