Corporate tax avoidance: Council agrees its position on hybrid mismatches

21 February 2017

The Council agreed its position on rules aimed at closing down 'hybrid mismatches' with the tax systems of third countries. 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. It complements and amends that directive accordingly.

The Council 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 1 January 2020 (one year later), and for 1 January 2022 as concerns one specific provision. 
  
  February 2017 draft directive on hybrid mismatches with third countries

© European Council