en de es fr it pt zh-CN Find us on Twitter Find us on LinkedIn

European Council Adopts New Rules On Tax Avoidance

The European Council has formally adopted a new anti-avoidance directive, which sets rules to prevent base erosion and profit shifting (BEPS).

The directive covers all taxpayers that are subject to corporate tax in European Union (EU) member states, including subsidiaries of companies based in third companies. It does the following:

  • Limits the amount of interest that a corporate taxpayer is entitled to deduct in a tax year, to discourage the practice of artificially shifting debt to jurisdictions with more generous deductibility rules;
  • Establishes exit taxation rules, to prevent tax base erosion in the state of origin;
  • Introduces a general anti-abuse rule, to cover gaps that may exist in member states' specific anti-abuse legislation;
  • Introduces controlled foreign company (CFC) rules, to reattribute the income of a low-taxed controlled foreign subsidiary to its (usually more highly taxed) parent company; and
  • Introduces rules on hybrid mismatches, to prevent companies from taking advantage of disparities between national tax systems to reduce their overall tax liability.

The Council said that the directive will ensure that the anti-BEPS measures drawn up by the Organisation for Economic Cooperation and Development (OECD) are implemented in a coordinated manner by the EU, including by the six member states that do not belong to the OECD. Three of the five areas covered by the directive implement OECD recommendations, namely the interest limitation rules, the CFC rules, and the rules on hybrid mismatches.

EU member states will be given until December 31, 2018, to transpose the directive into their national laws and regulations. They will have until December 31, 2019, to transpose the exit taxation rules. Member states that have targeted rules that are equally effective to the interest limitation rules may apply them until the OECD reaches an agreement on a minimum standard, or until January 1, 2024, at the latest.

Peter Kažimír, President of the Council and Finance Minister for Slovakia, said: "This new directive aims to protect our domestic corporate tax bases against aggressive tax planning practices that directly affect the functioning of the internal market. It is therefore an important step, which also demonstrates that we see the fight against such practices not only as our common priority but also our common commitment."

- See more at: http://www.tax-news.com/news/European_Council_Adopts_New_Rules_On_Tax_Avoidance____71694.html#sthash.6n1CsBDh.dpuf

News

PGK Consultores joins TGS Global Network

TGS is delighted to announce the membership of PGK Consultores, Argentina. PGK is a dynamic firm whose partners began th

Read more >


Garssa Consulting has joined the TGS Global Network

TGS welcome Garssa Consulting to TGS. In 2012, Garssa Consulting saw a gap in the Colombian market and established a hig

Read more >


Nakamoto & Company has joined the TGS Global Network

We are delighted to welcome our first Japanese member firm, Nakamoto & Company / Nakamoto International Tax Corporat

Read more >


Pfister Treuhand AG has joined the TGS Global Network

We are very pleased to welcome the Swiss firm, Pfister Treuhand AG, as our most recent TGS member. With head offices in

Read more >


France To Increase Financial Transactions Tax

French deputies have voted in favor of an amendment to the draft 2017 Budget that will increase the country's tax on fin

Read more >


>