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Tax Alert 2016-30

Tax Alert 2016-30



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EU developments on Beneficial Ownership Information, Hybrid mismatches & C(C)CTB

At its meeting on December 6, 2016 the Economic and Financial Affairs Council of the EU (ECOFIN) inter alia:

  • adopted the proposal to grant access for tax authorities to anti-money laundering information;
  • did not reach an agreement on the proposal aimed at extending the recently agreed rules on hybrid mismatches to third countries; and
  • welcomed the corporate tax reform proposals presented by the Commission on October 25, 2016, including inter alia the C(C)CTB.

Tax authorities’ access to beneficial ownership information

The ECOFIN formally adopted the proposal granting access for tax authorities to anti-money laundering information, especially customer due diligence information and information on beneficial ownership. This takes the form of an amendment to the Directive on Administrative Cooperation (DAC) in the field of direct taxation and is referred to as ‘DAC5’. The new rules will apply as from January 1, 2018.

During the meeting on November 8, 2016 ECOFIN reached an agreement on the proposal after which it was submitted to the European Parliament. The Parliament went further than the Commission’s original proposal by suggesting that the information obtained by the tax authorities should be automatically exchanged between Member States. The automatic exchange was not, however, included in the final text of DAC5 as adopted on December 6. According to European Commissioner for economic and financial affairs Pierre Moscovici, the Commission should come up with a separate proposal in this respect taking into account the related developments, particularly the ongoing pilot project for exchange of such information initiated by the G5 and the outcome of the proposed amendments to the Anti-Money Laundering Directive.

Anti-Tax Avoidance Directive 2 (ATAD 2) – No agreement reached

On December 6, 2016 EU Member States failed to reach agreement on amendments to the hybrid mismatch rules contained in the Anti-Tax Avoidance Directive (ATAD 1).

According to the compromise text issued on December 2, 2016, the proposed amendments (that would take the form of a directive, ‘ATAD 2’ to amend ATAD 1) would have extended the scope of the rules to hybrid mismatches between EU Member States and third countries, as well as some mismatches that were not fully covered, such as certain types of hybrid permanent establishments and financial instrument mismatches. A new provision on reverse hybrid entities was also included. In addition, ATAD 2 was intended to bring the rules into line with the rules recommended by the OECD in the 2015 Final BEPS Report on Action 2.

From comments made during the debate of EU finance ministers on the proposals it appears that a number of last minute changes were made to the draft text of ATAD 2, including changes regarding the carve-out provisions. A number of Member States indicated that they were not in a position to approve the revised text, and needed more time to consider, including in some cases approval from their national parliaments. The Netherlands considered that the timing laid down in the proposed text, which provides that Member States should implement ATAD 2 by December 31, 2018 and apply the provisions as from January 1, 2019, should be deferred.

C(C)CTB – Proposal welcomed

The ECOFIN adopted conclusions on the Commission’s corporate tax package of October 25, 2016. The ECOFIN particularly welcomed the proposal on a Common Corporate Tax Base (CCTB) and on a Common Consolidated Corporate Tax Base (CCCTB). It noted the two-step approach and supported the view that work primarily should be focused on the rules for calculating the common tax base. Tax consolidation should be considered without delay once discussion on the elements of a common tax base has been concluded. The Finance Ministers noted the ambitious timeline proposed by the Commission for the C(C)CTB and the dispute resolution proposals and called for their swift examination.

KPMG Luxembourg comment

Discussions on the ATAD 2 and on the C(C)CTB will have to be closely followed in the first half of 2017. It is expected that the ATAD 2 will be first adopted. Regarding the C(C)CTB, discussions may show how countries will react, in particular considering the decision from the Netherlands not to support the relaunched proposal.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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