Taxation and customs union

The Anti Tax Avoidance Directive

On 28 January 2016 the Commission presented its proposal for an Anti-Tax Avoidance Directive as part of the Anti-Tax Avoidance Package. On 20 June 2016 the Council adopted the Directive (EU) 2016/1164 laying down rules against tax avoidance practices that directly affect the functioning of the internal market.

In order to provide for a comprehensive framework of anti-abuse measures the Commission presented its proposal on 25th October 2016, to complement the existing rule on hybrid mismatches. The rule on hybrid mismatches aims to prevent companies from exploiting national mismatches to avoid taxation.

In addition to the proposal the Commission also published its Staff Working Document.

The Anti-Tax Avoidance Directive contains five legally-binding anti-abuse measures, which all Member States should apply against common forms of aggressive tax planning.

Member States should apply these measures as from 1 January 2019.

It creates a minimum level of protection against corporate tax avoidance throughout the EU, while ensuring a fairer and more stable environment for businesses.

The anti-avoidance measures in the Anti-Tax Avoidance Directive other than the rule on hybrid mismatches, are:

Controlled foreign company (CFC) rule:  to deter profit shifting to a low/no tax country.

Switchover rule: to prevent double non-taxation of certain income.

Exit taxation: to prevent companies from avoiding tax when re-locating assets.

Interest limitation: to discourage artificial debt arrangements designed to minimise taxes.

General anti-abuse rule: to counteract aggressive tax planning when other rules don’t apply.

Key to the pictures