On 23 July 1990 the Council adopted Directive 90/434/EEC on a common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States (the Merger Directive). The objective of the Merger Directive is to remove fiscal obstacles to cross-border reorganisations involving companies situated in two or more Member States. The Merger Directive includes a list of the legal forms to which it applies. The companies must be subject to corporate tax, without being exempted, and resident for tax purposes in a Member State.
Directive 2005/19/EC amending the Merger Directive adds new legal entities to this list annexed to the initial Directive and to which it applies. It also extent the coverage to a new type of transactions known as a split off and introduces specific provisions providing relief on the conversion of branches into subsidiaries.