Anti-tax-avoidance directive

‘EU Legislation in Progress’ briefings aim to provide Members of the European Parliament with systematic and automatic analysis on all substantial proposals for EU legislation at every stage of the legislative procedure. Each contains an account of the purpose, content and legal aspects of the legislation proposed, in particular analysing what the legislation would change, as well as any previous legislation and the background. An overview of stakeholders’ views is also provided, as well as the opinions of national parliaments and the two advisory committees.

They are all made publicly available for stakeholders and the public.The proposal for a directive on 'Rules against tax avoidance practices that directly affect the functioning of the internal market' was one of two legislative proposals of the 28 January 2016 European Commission 'anti-tax-avoidance package'.

Linked with the OECD/G20 Base erosion and profit shifting action plan (BEPS), it targets schemes where corporate taxpayers operating businesses in several countries take advantage of disparities and loopholes to reduce their tax bills. The objective is to realign corporate taxation with the relevant business substance (income) of the corporate taxpayer, fighting against aggressive corporate tax avoidance. The proposal for a directive sets legally binding minimum standards for six practices.

Three of these are included in the BEPS action plan (interest limitation rules, controlled foreign company rules, and rules on hybrid mismatches). The other three (a general anti-abuse rule, exit taxation rules and a switchover clause) came out of discussions on the common consolidated corporate tax base (CCCTB) proposal. As a tax measure, Parliament is only consulted, with the proposal adopted by the Council. As finally adopted, the directive covers all these six aspects with the exception of the switchover clause and changes to the rules on the controlled foreign companies (CFC) rules.

[This briefing updates a previous edition, of 3 June 2016]

Author: Cécile Remeur

EP: EPRS: Briefing: EU Legislation in Progress http://epthinktank.eu/eu-legislation-in-progress/

ESO: Background information: Call for stricter rules against tax avoidance http://www.europeansources.info/record/call-for-stricter-rules-against-tax-avoidance/

---