Latest EU Anti-Tax-Avoidance Directive | KPMG | CA

Latest EU Anti-Tax-Avoidance Directive

Latest EU Anti-Tax-Avoidance Directive

A newly agreed on EU directive may prevent tax avoidance through hybrid mismatches.

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On February 21, 2017, EU member states agreed on a new directive that will amend the EU Anti-Tax-Avoidance Directive, which was formally adopted in July 2016. Article 9 of the July 2016 directive covered hybrid mismatches between EU member states. The new directive will extend the scope of that article to also cover hybrid mismatches between EU member states and third countries. The new directive provides for rules that are consistent with those that were recommended by the OECD in the 2015 base erosion and profit shifting (BEPS) final report on BEPS Action 2.

 

The new directive states that EU Member States must use the BEPS Action 2 final report as a source of illustration and interpretation to the extent the rules are consistent with the provisions of the new directive and EU law.

 

The new directive covers:

  • Mismatches between 
    • Associated enterprises (as defined in the new directive) 
    • Head offices and permanent establishments 
    • Permanent establishments of the same entity or 
  • Mismatches under a structured arrangement.

 

The new directive covers a number of (hybrid) mismatches-especially financial instrument mismatches; hybrid entity mismatches; reverse hybrid mismatches; permanent establishment mismatches; tax residency mismatches and imported mismatches.

 

Article 9 of the July 2016 EU Anti-Tax-Avoidance Directive and the rules proposed in the new directive are to be implemented by December 31, 2019 and apply from January 1, 2020 (with an exception for reverse hybrids).

 

The part of the directive dealing with so-called "reverse hybrids" will only have to be implemented by December 31, 2021 and applied from January 1, 2022. It is not clear whether EU Member States may or must apply Article 9 to reverse hybrids in the period between January 1, 2020 and January 1, 2022.

 

For more information, contact your KPMG adviser.

 

Information is current to February 28, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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