Fair Taxation: Commission welcomes new rules to prevent tax avoidance through non-EU countries

The Commission welcomes the agreement reached at today's ECOFIN on new rules to help prevent tax avoidance via non-EU countries. This latest addition to the EU's anti-tax avoidance toolbox will prohibit multinational companies from escaping corporate tax by exploiting differences between the tax systems of Member States and those of non-EU countries (so-called 'hybrid mismatches').

"Today is yet another success story in our campaign for fairer taxation" said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs. "Step by step, we are eliminating the channels used by certain companies to escape taxation. I congratulate the Member States for agreeing on this tangible measure to clamp down on tax abuse and install a fairer tax environment in the EU."

The new provisions build on the Anti-Tax Avoidance Directive (ATAD) agreed last July, which sets out EU-wide anti-abuse measures against tax avoidance. Hybrid mismatches occur when countries have different rules for the tax treatment of certain income or entities, which multinational companies can abuse to avoid being taxed in either country. The agreement reached today (ATAD 2) will ensure that hybrid mismatches of all types cannot be used to avoid tax in the EU, even where the arrangements involve third countries. Today's agreement comes less than four months after the Commission put forward its proposal.

The new rules will come into force on January 1, 2020, with a longer phasing-in period of 2022 for one article (Art. 9a).

Background

The binding measures agreed today build on the extensive work done over the past two years to tackle corporate tax avoidance and ensure fair and effective taxation in the EU.

Major initiatives put forward by the Juncker Commission to boost tax transparency and reform corporate taxation are already reaping results. The ambitious Anti-Tax Avoidance Directive was agreed by Member States last July, ensuring that anti-abuse measures will apply throughout the EU from 2019. Commission proposals to increase transparency on tax rulings and on multinationals' tax related information were also agreed by Member States in record time. The proposal for public Country-by-Country Reporting by large companies is being negotiated by Council and the European Parliament, as is a proposal to strengthen the Anti-Money Laundering Directive.

A number of other substantial corporate tax reforms have also been proposed, notably the re-launch of the Common Consolidated Corporate Tax Base (CCCTB) in October 2016. Member States are also working on a common EU list of third country tax jurisdictions that do not conform to international tax good governance standards. The list should be ready by the end of the year.

IP/17/305