The Interest and Royalties (I+R) Directive is designed to eliminate withholding tax obstacles in the area of cross-border interest and royalty payments within a group of companies by abolishing:
- withholding taxes on royalty payments arising in a Member State, and
- withholding taxes on interest payments arising in a Member State
These interest and royalty payments shall be exempt from any taxes in that State provided that the beneficial owner of the payment is a company or permanent establishment in another Member State.
As under the Merger and the Parent-Subsidiary Directives, the benefits of the I+R Directive are only granted to companies which are
- subject to corporate tax in the EU,
- tax resident in an EU Member State and
- of a type listed in the annex to the Directive.
The shareholding requirements in order for the directive to apply is 10% direct or indirect holding.