skills-ws/skills/eu-tax-accounting/references/5-cross-border-specifics.md

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## Contents

- 5. Cross-Border Specifics
- Transfer Pricing
- Withholding Taxes (Domestic Statutory Rates, before Treaties/EU Directives)
- ATAD I & II — Anti-Tax Avoidance Directives
- DAC6 & DAC7 — Mandatory Disclosure
- Pillar Two — Global Minimum Tax (15%)

## 5. Cross-Border Specifics

### Transfer Pricing

All EU countries follow the **OECD Transfer Pricing Guidelines** (arm's length principle, Art. 9 OECD Model Tax Convention):

- **Documentation**: Most countries require a Master File + Local File (OECD three-tiered approach)
- **Country-by-Country Reporting (CbCR)**: Required for MNE groups with consolidated revenue ≥ €750M (EU Directive 2016/881, implementing BEPS Action 13)
- **Safe harbors**: Some countries offer safe harbors for low-value-adding services (typically 5% markup)
- **Advance Pricing Agreements (APAs)**: Available in most EU jurisdictions — binding 3-5 year agreements with tax authorities

### Withholding Taxes (Domestic Statutory Rates, before Treaties/EU Directives)

*Last verified: Jun 2026. These are **default domestic rates to non-residents**; tax treaties and the Parent-Subsidiary / Interest & Royalties Directives (below) frequently reduce them to 0% within the EU. "0%" for interest is often conditional (e.g. arm's-length, not paid to a low-tax jurisdiction). Several states levy punitive WHT (often 35–75%) on payments to EU "non-cooperative jurisdiction" lists. Confirm per payment at the national authority.*

| Country | Dividends | Interest | Royalties |
|---------|-----------|----------|-----------|
| Austria | 27.5% | 0% (corporate) | 20% |
| Belgium | 30% | 30% | 30% |
| Bulgaria | 5% | 10% | 10% |
| Croatia | 10% (20% to listed non-coop) | 15% | 15% |
| Cyprus | 0% | 0% (17% on interest to certain EU "blacklist" payees) | 0% (10% on Cyprus-source IP to blacklist) |
| Czech Republic | 15% (35% to non-treaty/non-EU) | 15% | 15% |
| Denmark | 27% (often reduced/refunded) | 22% (conditional) | 22% |
| Estonia | 0% (CIT charged on distribution instead) | 0% | 10% |
| Finland | 20% (corporate) / 30% (individuals) | 0% | 20% |
| France | 25% | 0% (to EU/most) | 25% |
| Germany | 26.375% (incl. soli) | 0% (generally) | 15.825% |
| Greece | 5% | 15% | 20% |
| Hungary | 0% (to companies; 15% to individuals) | 0% (to companies) | 0% (to companies) |
| Ireland | 25% | 20% | 20% |
| Italy | 26% | 26% | 30% (on 75% base → ~22.5% effective) |
| Latvia | 0% (20% to non-coop) | 0% (20% to non-coop) | 0% (20% to non-coop) |
| Lithuania | 15% | 10% | 10% |
| Luxembourg | 15% | 0% | 0% |
| Malta | 0% | 0% | 0% |
| Netherlands | 15% (dividend); conditional 25.8% WHT on interest/royalties to low-tax/non-coop | conditional 25.8% (anti-abuse) | conditional 25.8% (anti-abuse) |
| Poland | 19% | 20% | 20% |
| Portugal | 25% (35% to non-coop) | 25% (35% to non-coop) | 25% (35% to non-coop) |
| Romania | 8% | 16% | 16% |
| Slovakia | 7% (35% to non-coop) | 19% (35% to non-coop) | 19% (35% to non-coop) |
| Slovenia | 15% | 15% | 15% |
| Spain | 19% | 19% | 24% |
| Sweden | 30% (kupongskatt) | 0% | 0% (for companies) |

**Parent-Subsidiary Directive** (2011/96/EU): Eliminates withholding tax on dividends between EU parent and subsidiary companies when:
- Parent holds ≥ 10% of subsidiary's capital (some countries: 25%)
- Holding period ≥ 1-2 years (country-dependent)
- Both companies are subject to corporate tax in their EU country
- Anti-abuse clause prevents use for arrangements not reflecting economic reality

**Interest & Royalties Directive** (2003/49/EC): Eliminates withholding tax on interest and royalty payments between associated EU companies (≥ 25% direct holding).

### ATAD I & II — Anti-Tax Avoidance Directives

**ATAD I** (Directive 2016/1164, effective 2019):

| Rule | Description |
|------|-------------|
| **Interest Limitation** (Art. 4) | Net borrowing costs deductible up to 30% of EBITDA (or €3M de minimis). Excess carried forward. |
| **Exit Taxation** (Art. 5) | Unrealized gains taxed when assets/tax residence transferred out of a country. EU transfers: installment over 5 years. |
| **GAAR** (Art. 6) | General Anti-Abuse Rule. Non-genuine arrangements put in place for tax advantage can be disregarded. |
| **CFC Rules** (Art. 7-8) | Controlled Foreign Company rules. Undistributed income of low-taxed subsidiaries attributed to parent. Triggered when subsidiary's effective tax < 50% of parent country rate (varies by implementation). |
| **Hybrid Mismatches** (Art. 9, ATAD II) | Deny deduction or require inclusion for payments exploiting differences in tax treatment between jurisdictions. Extended to third countries by ATAD II (Directive 2017/952). |

### DAC6 & DAC7 — Mandatory Disclosure

**DAC6** (Directive 2018/822): Mandatory disclosure of cross-border tax arrangements:
- **Who reports**: Intermediaries (tax advisors, lawyers, banks) or taxpayers if no intermediary
- **What**: Cross-border arrangements meeting specific "hallmarks" (generic or specific, with or without main benefit test)
- **When**: Within 30 days of arrangement being made available/ready for implementation
- **Penalties**: Vary by country. Germany: up to €25,000. France: up to €10,000 per arrangement.

**DAC7** (Directive 2021/514): Platform reporting (effective Jan 1, 2023):
- Digital platforms must report sellers' income to tax authorities
- Covers: property rental, personal services, sale of goods, vehicle rental
- Automatic exchange of information between EU tax authorities

### Pillar Two — Global Minimum Tax (15%)

EU implementation via Directive 2022/2523, effective from December 31, 2023:

- **Scope**: MNE groups with consolidated revenue ≥ €750M (in at least 2 of the last 4 fiscal years)
- **Rate**: 15% minimum effective tax rate per jurisdiction
- **IIR (Income Inclusion Rule)**: Parent jurisdiction applies top-up tax on low-taxed subsidiaries
- **UTPR (Undertaxed Profits Rule)**: Backstop if IIR doesn't apply; effective from 2025
- **QDMTT (Qualified Domestic Minimum Top-Up Tax)**: Countries can collect the top-up tax themselves

**Implementation status (as of Jun 2026):**
- **IIR**: in force across all 27 EU member states (mandatory under the directive; transposed by all, after late-mover infringement pressure).
- **UTPR**: effective for fiscal years starting on/after Dec 31, 2024 (i.e. live for 2025 onward).
- **QDMTT**: adopted by most member states (incl. Ireland, Netherlands, Luxembourg, Belgium, Germany, France, Czechia, Hungary, etc.) to collect the top-up domestically rather than cede it abroad.
- **Watch item**: the OECD/US "side-by-side" arrangement announced in 2025 (potentially exempting US-parented groups from UTPR/IIR in exchange for the US GILTI regime) was still being worked through in 2026 and could change UTPR exposure for US groups. Verify current status at [OECD BEPS Pillar Two](https://www.oecd.org/tax/beps/) before advising in-scope groups.

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