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EU Council reaches agreement expanding hybrid mismatch rules

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EU Council reaches agreement expanding hybrid mismatch rulesThe Council of the European Union (EU Council) has formally adopted a directive amending the Anti-Tax Avoidance Directive (ATAD). The directive, referred to as ATAD 2, expands the existing hybrid mismatch rules adopted in July 2016 to third party non-member states and expands the definitions of hybrid mismatches. The previous ATAD rules were limited to hybrid-entity or instrument mismatches occurring between EU member states. The final approved directive follows the agreement reached by the Economic and Financial Affairs Council of the European Union (ECONFIN) on Feb. 21. For previous coverage of ECONFIN’s ATAD 1 and 2, click here.

Member states must implement the hybrid mismatch directive into their local laws and regulations by Jan. 1, 2020. The reverse hybrid mismatch must be implemented into member states’ local law by the same day.

ATAD 2 may generate significant tax consequences for multinational companies operating in the EU. Organizational structures should be reviewed to determine the impact of the directive, and to determine whether any opportunities exist to mitigate the potential tax consequences.

For previous Grant Thornton coverage of the OECD’s BEPS initiative click here.

Contact:
David Sites
Partner, Washington National Tax Office
T +1 202 861 4104

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