Political agreement has now been reached on the EU’s Anti-Tax Avoidance Directive (ATAD).
On 17 June 2016 the Economic and Financial Affairs Council (ECOFIN) of the EU held discussions with a view to reaching a political agreement on the proposal for an anti-tax avoidance directive (ATAD). A final compromise text was put forward, and as no objections were raised by the 20 June 2016 deadline, political agreement was reached and the text will be submitted to a later ECOFIN meeting for formal adoption. There is clearly a strong desire within the EU to implement effective anti-tax avoidance measures in a consistent and coordinated manner, and there has certainly been very tangible progress towards this during the first half of 2016. The package of measures was first unveiled at the end of January 2016, and was positioned as a mechanism for ensuring consistent and appropriate implementation of the OECD’s BEPS recommendations by Member States.
At that time, there were concerns that the EU appeared to be going above and beyond the scope of the OECD’s BEPS project. However, in the period since its original proposal, it is clear that the EU has listened to the concerns of individual Member States and has made amendments and refinements. The ATAD is now, on the whole, consistent with the OECD’s recommendations.
The ATAD lays down common minimum rules on the areas of interest limitation, exit taxation, GAAR, controlled foreign companies and hybrid mismatches. Here we consider three of the measures in more detail in terms of their potential impact for UK corporates:
We do have some concerns about whether the ATAD provides sufficient detail in the different areas covered to properly inform effective and consistent implementation across the Member States. The areas covered by the ATAD are complex and many jurisdictions already have well established rules within their national tax codes which have evolved over recent years. These factors may result in a divergence of local interpretation and implementation of the ATAD.
This Euro Tax Flash has further details on the ATAD, and also summarises the next steps towards finalisation and implementation.
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