EU: Agreement not yet reached, hybrid mismatches with third countries

EU: Agreement not yet reached, hybrid mismatches

EU Member States today failed to reach an agreement on amendments to the hybrid mismatch rules contained in the Anti-Tax Avoidance Directive (Council Directive (EU) 2016/1164 of 12 July 2016).

Related content

Hybrid mismatches

According to compromise text (2 December 2016), the proposed amendments—to take the form of a directive to amend the Anti-Tax Avoidance Directive—would have extended the scope of the rules to hybrid mismatches between EU Member States and third countries, as well as some mismatches that were not fully covered, such as certain types of hybrid permanent establishments and financial instrument mismatches. A new provision on reverse hybrid entities was also included. 

In addition, the directive to amend the Anti-Tax Avoidance Directive was intended to bring the rules into line with the recommendations of the OECD pursuant to the final report for base erosion and profit shifting (BEPS) Action 2.

From comments made during the debate on the proposals by EU finance ministers, it appeared that a number of last minute changes were made to the draft text of the amendments, including changes regarding the carve-out provisions. A number of representatives of various EU Member States indicated that they were not in a position to approve the revised text, and needed more time to consider and in some instances to obtain approval from their national parliaments. The proposed text provided that EU Member States would need to implement the amendments by 31 December 2018 and apply the provisions as from 1 January 2019. 

Tax rulings

A separate agenda item—the EU Code of Conduct group on business taxation—was presented for endorsement by the ECOFIN meeting. This included guidelines on the issuance of tax rulings by EU Member States. The guidelines cover the process of granting a ruling, the term of a ruling and subsequent audit/checking procedure, and also publication of rulings that are of general application to the affairs of other taxpayers in similar circumstances.

 

Read a December 2016 report prepared by the KPMG member firm in the Netherlands: No agreement yet on EU Anti-Tax Avoidance Directive 2: hybrid mismatches with third countries

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor 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 on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.