EU finance ministers agreed at the ECOFIN meeting on 21 February on a draft directive to extend the hybrid mismatch rules to cover arrangements with non-EU countries from January 2020. Agreement was reached in July 2016 on the anti-tax avoidance directive (ATAD), which contained rules preventing hybrid mismatches involving EU member states. The Commission proposed further corporate tax anti-avoidance measures in October (referred to as ATAD 2), one of which was extension of the hybrid mismatch rules to third countries. These rules prevent multinational groups avoiding tax by exploiting differences in the tax systems between jurisdictions.
The Council reached a compromise on the following issues:
For hybrid regulatory capital, a carve-out from the rules is established for the banking sector. The carve-out will be limited in time, and the Commission will be asked to present a report assessing the consequences.
For financial traders, a delimited approach to on-market transfers will follow that of the OECD.
Implementation is set for 1 January 2020 (one year later than the July 2016 directive) and 1 January 2022 for art 9A on ‘reverse hybrid mismatches’.
The directive requires unanimity within the Council, after consulting the EU Parliament. Member states will have until 31 December 2019 to transpose the directive into national laws.
EU finance ministers agreed at the ECOFIN meeting on 21 February on a draft directive to extend the hybrid mismatch rules to cover arrangements with non-EU countries from January 2020. Agreement was reached in July 2016 on the anti-tax avoidance directive (ATAD), which contained rules preventing hybrid mismatches involving EU member states. The Commission proposed further corporate tax anti-avoidance measures in October (referred to as ATAD 2), one of which was extension of the hybrid mismatch rules to third countries. These rules prevent multinational groups avoiding tax by exploiting differences in the tax systems between jurisdictions.
The Council reached a compromise on the following issues:
For hybrid regulatory capital, a carve-out from the rules is established for the banking sector. The carve-out will be limited in time, and the Commission will be asked to present a report assessing the consequences.
For financial traders, a delimited approach to on-market transfers will follow that of the OECD.
Implementation is set for 1 January 2020 (one year later than the July 2016 directive) and 1 January 2022 for art 9A on ‘reverse hybrid mismatches’.
The directive requires unanimity within the Council, after consulting the EU Parliament. Member states will have until 31 December 2019 to transpose the directive into national laws.
