The EU Economic and Financial Affairs Council (ECOFIN) today formally adopted without discussion the Anti-Tax Avoidance Directive (ATAD), designed to tackle multinational corporation tax avoidance. Political agreement had been reached on the directive on June 17.
“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,” said Peter Kažimír, minister for finance of Slovakia and president of the Council, announcing the agreement.
The directive is part of the Commission’s January 28 Anti-Tax Avoidance Package, which builds on OECD/G20 base erosion profit shifting (BEPS) plan agreements. It provides for new rules on exit taxation, a general anti-abuse rule, controlled foreign company rules, and rules to prevent taxpayers from taking advantage of hybrid mismatches.
Also included are interest limitation rules consistent with final BEPS plan recommendations, which deny deductions for interest exceeding 30 percent of earnings before interest, tax, depreciation, and amortization (EBITDA).
Under the final compromise agreement, member States that have national rules that are equally effective to the interest limitation rules may apply them until the OECD reaches agreement on a minimum standard for interest deduction limitations, or until January 1, 2024, at the latest.
Some have criticized the final agreement as being only a watered down version of the original Commission proposal. European Parliament Greens spokesperson Eva Joly said that while the provisions on exit taxation and the general antiabuse clause are “important,” the agreement is otherwise “a major missed opportunity.”
“This minimalist legislation shows EU governments are not taking the problem seriously and that there is a huge gap between the political rhetoric following each tax scandal and the concrete actions of EU decision-makers,” Joly said.
Member States have until December 31, 2018 to transpose the directive into their national laws and regulations, except for the exit taxation rules, for which they will have until December 31, 2019.
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