The European finance ministers have reached a political agreement on the second version of the anti-tax avoidance directive (ATAD2) specifically aiming to respond to hybrid mismatch situations between a member state and a third country (see EUROPE 11654).
These mismatches play on the difference in legal description of the same operation that may exist between one member state and another and give rise to situations of double non-taxation. The first version of the directive, which was the subject of an agreement between the member states in May (see EUROPE 11575), dealt with hybrid mismatch situations that may arise between two member states. The Commission subsequently added to the rules, by proposing to also cover situations with third countries.
The agreement was made possible by a compromise, midway between the demands of France and the United Kingdom, in order to smooth out their clash over the exemptions for the financial sector called for by London.
The final text provides for voluntary exemptions ('a member state may include...') until 31 December 2022 (the date has been left in brackets in the text). This 'sunset clause' also provides for the Commission to assess the consequences of these exemptions.
At the meeting, Denmark said that it saw no reason to leave a loophole open until 2022, but agreed to rally behind the compromise.
The second point the ministers had to decide upon was the date for the rules on reverse hybrids to enter into force. This has finally been put at 1 January 2022, whilst the rest of the directive will apply from 2020.
The Commission, Denmark, Romania, Croatia, Bulgaria, Slovenia and Poland are reported to have had a preference for implementation in 2019 for ATAD1, but also got behind the compromise.
The Belgian and Luxembourg ministers once again stressed the need for a level playing field at international level. “I think it is high time we look around us at what others are doing. Luxembourg has no problem that the EU is the good student or pioneer and acting faster than others, but we have to make sure the others are following and that were not alone in implementing BEPS (the OECD's action plan to fight tax optimisation: Ed)”, said the Luxembourg minister, Pierre Gramnega. Johan Van Overtveldt of Belgium added his voice to these comments. By request of Luxembourg, the Commission has pledged to take stock of this matter and will return to it in the autumn, the Commissioner for Taxation, Pierre Moscovici, announced. (Original version in French by Élodie Lamer)