EU: Anti-Tax Avoidance Directive II (“ATAD II”) formally adopted

On 29 May 2017 the Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (“ATAD II”) was formally adopted by the EU Council. Political agreement on this Directive had already been achieved at ECOFIN level on 21 February 2017.

The amended Directive (ATAD II) has a broader scope than ATAD I (adopted in 2016 and effective as of 2019) as it also covers hybrid mismatches with third countries and extends the hybrid mismatch definition to cover more categories of mismatches (e.g. to include arrangements involving PEs, hybrid transfers, imported mismatches, reverse hybrid entities and rules on tax residency mismatches). The terms and concepts contained in ATAD II are very similar to those in the OECD’s BEPS Action 2 recommendation as it currently stands.

The EU Member States will need to transpose the provisions of ATAD II by 31 December 2019 into their national laws and apply them per 1 January 2020. Only exception is the reverse hybrid entity rule for which the EU Member States will need to transpose by 31 December 2021 and apply per 1 January 2022. Nevertheless, payments to reverse hybrids will no longer be deductible from 1 January 2020.

We strongly recommend multinationals with Swiss & EU operations to review their structures to consider whether any of the new rules applies. In particular also Swiss entities benefiting from e.g. the Swiss finance branch and the Swiss principal taxation rules (to the extent still applicable in 2020 depending on timing and outcome of the Swiss Corporate Tax Reform 17 project) should review a potential impact by these rules on a case by case basis.

For more information please find below the newsletter from our EUDTG Network:

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Contact

Armin Marti
Partner Tax & Legal Services, Leader Corporate Tax Services
+41 58 792 43 43
armin.marti@ch.pwc.com

Anna-Maria Widrig Giallouraki
Senior Tax Manager
+41 58 792 42 87
anna-maria.widrig.giallouraki@ch.pwc.com

Published by

Armin Marti

Armin Marti
PwC
Birchstrasse 160
Postfach, 8050 Zurich
+41 58 792 43 43

Armin leads the PwC Swiss Corporate Tax practice. He holds a Master in Business Administration from the University of St. Gallen, Switzerland (lic. oec. HSG) and has qualified as a Swiss Certified Tax Expert.

As a member of the global PwC International Tax Services (ITS) Network and former country leader for ITS, Armin has gained extensive experience in leading complex cross-border tax projects.

Armin Marti has over 29 years experience in providing international tax consultancy for large quoted and privately held Swiss and foreign multinationals. He advises his clients on tax effective set-up of legal entity structures including domestic and cross-border tax restructurings, tax effective group financing, tax efficient profit repatriation, acquisitions and divestitures plus tax effective business models.