EU Council Adopts Directive On Hybrid Mismatches With Third Countries (ATAD2)

The EU Council adopted the rules to close down hybrid mismatches with the tax systems of third countries (ATAD 2), which aims to prevent corporate tax avoidance and contributes to the implementation of OECD's base erosion and profit shifting (BEPS) measures.

Hybrid Mismatch Arrangements

The directive aims to prevent companies from exploiting disparities between two or more tax jurisdictions to reduce their overall tax liability. Such arrangements can result in a substantial erosion of the taxable bases of corporate taxpayers in the EU. The directive will contribute to implementation of 2015 OECD recommendations addressing corporate tax base erosion and profit shifting.

Council Adopts the Measures

The directive was adopted at a meeting of the Competitiveness Council, without discussion. Edward Scicluna, minister for finance of Malta, which currently holds the Council presidency said that the aim of the directive is to tackle one of the main practices that multinational companies have devised to reduce their tax bills. "The directive adds to the rules we adopted last year to tackle the most common forms of tax avoidance. It will also ensure implementation of the OECD's recommendations,” he informed. 

Member states will have time until January 1, 2020, to transpose the directive into national laws and regulations (January 1, 2022, for one specific provision), the Council informed.

Sources: European Council - Press Release, European Council - Meeting Outcomes, The Directive


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