EU Council reaches agreement expanding hybrid mismatch rules

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.

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

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.