On February 21, 2017 the Council of the European Union issued a press release announcing that on that same day the Economic and Financial Affairs Council (Hereafter: ECOFIN) agreed its position on rules aimed at closing down 'hybrid mismatches' with the tax systems of third countries. These rules are laid down the Proposal for a Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries, also known as ATAD 2.

According to the press release, the directive will contribute to implementation of 2015 OECD recommendations addressing corporate tax base erosion and profit shifting. The proposal addresses hybrid mismatches with regard to non-EU countries, given that intra-EU disparities are already covered by the 'anti-tax-avoidance directive' adopted in July 2016 (ATAD 1). It complements and amends that directive accordingly.

In the press release it is furthermore stated that ECOFIN reached a compromise on the following issues:

·   for hybrid regulatory capital, a carve-out from the rules is established for the banking sector. The carve-out will be limited in time, and the Commission will be asked to present a report assessing the consequences;

·   for financial traders, a delimited approach is followed in line with that followed by the OECD;

·   as regards implementation, a longer timeline is foreseen than that set for the July 2016 directive. Implementation is set for January 1, 2020. However for article 9a (“Reverse hybrid mismatches”) an exception is made. For Article 9a implementation is set for January 1, 2022.

In the press release it is furthermore stated that the Council will adopt the directive once the European Parliament has given its opinion. Member states will then have until December 31, 2019 to transpose the directive into national laws and regulations.

Click here to be forwarded to the proposal for a Presidency compromise on a proposal for a Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries as made available on the website of the European Council/Council of the European Union.

More information can also be found in our article from February 20, 2017.

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