Corporate tax avoidance: Directive adopted on hybrid mismatches

The EU has taken a further step to prevent corporate tax avoidance, adopting rules to close down 'hybrid mismatches' with the tax systems of third countries.

On 29 May 2017, the Council adopted a directive to prevent corporate groups from exploiting the disparities between two or more tax jurisdictions to reduce their overall tax liability.

“Our aim here is to tackle one of the main practices that multinational companies have devised to reduce their tax bills”, said Edward Scicluna i, minister for finance of Malta, which currently holds the Council presidency. “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.”

The directive was adopted at a meeting of the Competitiveness Council, without discussion. This follows an agreement at a meeting on 21 February 2017. The European Parliament gave its opinion on 27 April 2017.

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

Press release on February 2017 Council agreement on hybrid mismatches with third countries

May 2017 directive on hybrid mismatches with third countries