Monday, 27 June 2016

EU anti-tax avoidance directive finalized

After considerable debate on the EU anti-tax avoidance directive (ATAD) on 17 June 2016, the Dutch presidency declared the ATAD final, provided no objections were raised by 11 pm on 20 June . The three-day postponement was intended to allow Belgium to decide whether it could accept the compromises put forward at the EU Economic and Financial Affairs Council (ECOFIN) meeting. Since no objections were raised, the ATAD is expected to be ready for formal approval at the next European Council meeting.
The revised deadline for the ATAD to be transposed into the national law of EU member states is 31 December 2018, so that it will take effect as from 1 January 2019 (with certain exceptions described below).
The revised ATAD provides for the minimum harmonization of rules in the areas of interest deductions, controlled foreign corporations and hybrid mismatches, and the introduction of a corporate general anti-abuse rule; the proposed “switchover clause” has been removed. The compromises agreed upon include allowing grandfathering of existing debt from the interest limitation rules and allowing EU member states that have national targeted rules equally effective to
the interest deduction limitation rule to continue to apply those rules until the earlier of 2024 or the adoption of interest limits as a minimum standard by OECD members. New rules on exit taxation (i.e. where a company transfers corporate residence, or transfers assets to a permanent establishment) must be introduced as from 2020. The European Commission has been instructed to prepare a proposal to counter third-country hybrid mismatches before the end of 2016.
Source: Deloitte