European Anti-Tax Avoidance Directive: Agreement Reached
On 21 June 2016, the European Council unanimously agreed on a package of anti-tax avoidance measures. This introduces some of the OECD's BEPS Actions such as CFC and anti-hybrid rules, as well as an exit tax and a GAAR. The controversial "switch-over clause" has been dropped and pre-17 June 2016 finance arrangements are excluded from the new interest limitation rules. The new measures will apply from 1 January 2019.
In our Client Alert of May 2016 we announced the deferral of agreement on the Anti-Tax Avoidance Directive (ATAD) following the ECOFIN meeting on 25 May. The EU Finance Ministers reconvened on 17 June in a further bid for consensus, which has now been reached. Approval of the latest version of the ATAD represents significant progress by the European Commission in pursuing its anti-tax avoidance agenda in response to the OECD's Base Erosion and Profit Shifting (BEPS) project.
The approval of the ATAD within a little over half a year from when it was first proposed is a major achievement. However, the rapid progress has meant that many changes have been made and the agreed text is a compromise on earlier versions.