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The EU Anti Tax Avoidance Package

AUTHOR(S): Joe Duffy, Aidan Fahy, Catherine Galvin, Turlough Galvin, Shane Hogan, Alan Keating, John Kelly, Greg Lockhart, Catherine O’Meara, Mark O’Sullivan, Liam Quirke, John Ryan, Gerry Thornton
PRACTICE AREA GROUP: Tax, BEPS
DATE: 29.01.2016

Pierre Moscovici, the European Commissioner for Taxation considers that 2016 should be the year of corporate tax reform and fiscal transparency for the EU. Yesterday’s announcements which included a draft directive to tackle base erosion and profit shifting (“BEPS”) are the first steps in an ambitious programme to introduce EU-wide corporate tax reform. Kevin Brady, chairman of the US Ways and Means Committee has already responded to the proposals describing them as “punitive policy changes” and calling for immediate US reform on international tax.

The draft directive designed to implement some of the BEPS recommendations is described as an Anti Tax Avoidance Directive (the “ATA Directive”) and includes interest limitation rules, exit tax provisions, a so-called ‘switch-over’ clause, a general anti abuse rule, CFC rules and anti-hybrid provisions. Please click here to read about the ATA Directive.

One of the most interesting questions arising out of the proposals is what the EU’s remit is in corporate tax matters. This is key to understanding what is required for the proposals (including the ATA Directive) to ever become law. Please click here to read about the process for EU corporate tax proposals to become law.

During 2016, you should expect to see a number of proposals from the EU designed to tackle the perceived problems of tax avoidance and lack of transparency. Yesterday, the European Commission (the “Commission”) also:

  • proposed further amendments to Directive 2011/16/EU to provide for the automatic exchange of country by country reports between Member States;
  • issued recommendations on measures to be included by EU Member States in double tax treaties; and
  • issued papers setting out steps to be taken to achieve a more coordinated EU approach to third countries on tax matters and a study on aggressive tax planning in the EU.

Later in 2016, the Commission will re-launch the common consolidated corporate tax base (the “CCCTB”).

Given the breadth of proposals announced, this briefing is the first in a series that we will issue over the coming weeks. Should you wish to discuss the EU developments on corporate tax, please contact any of our tax partners listed above or your usual Matheson contact.

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