The EU has unanimously adopted an amended directive.
The EU's new hybrid mismatch directive will prevent tax avoidance through hybrid mismatches. It amends article 9 of the EU Anti-Tax-Avoidance Directive so that it now covers hybrid mismatches between EU member states and third countries as well as hybrid mismatches between EU member states. A hybrid mismatch arrangement is a cross-border arrangement that generally uses a hybrid entity or hybrid instrument and results in a mismatch in the tax treatment of a payment across jurisdictions.
The final text of this amended directive does not contain any substantial changes from the text that EU member states had agreed on in February this year. The adopted directive includes a carve-out option until December 31, 2022 for hybrid regulatory capital in the banking sector and a carve-out for financial trades involving certain hybrid transfers.
The new directive covers:
EU member states must change their domestic laws to implement Article 9 of the July 2016 EU Anti-Tax-Avoidance Directive by December 31, 2019. The rules must apply, starting January 1, 2020 (with an exception for reverse hybrids). The part of the directive dealing with reverse hybrids will only have to be implemented by December 31, 2021 and applied from January 1, 2022.
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