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At the ECOFIN meeting held on 8 December 2015 the
European Union (EU) Council recalling that several
legislative proposals linked to the BEPS agenda are
under discussion – including the proposal for a Common
Consolidated Corporate Tax Base (CCCTB) – emphasized
the need for a coordinated implementation by Member
States of the anti-BEPS measures to be adopted at EU
level on the assumption that a common approach at
EU level towards the implementation of certain options
among the several proposed by OECD BEPS conclusions
would bring value with a view to ensure the proper
functioning of the Single Market. A draft text of the so-
called “Anti-BEPS Directive” was discussed.
On 28 January 2016 the European Commission
released the Anti-Tax Avoidance Package made up of
proposed measures on the basis of the three “core
pillars” Commission’s agenda for fairer taxation (i.e.,
ensuring effective taxation within the EU, increasing
tax transparency and securing a level playing field). The
package includes:
• a revision of the Administrative Cooperation
Directive, whereby national authorities will exchange
tax-related information on multinational companies’
activities, on a country-by-country (CbC) basis (“CbC
Reporting”);
• a proposed Anti-Tax Avoidance Directive, with
legally-binding measures to tackle some of the
most prevalent tax avoidance schemes (“Anti-BEPS
Directive”);
• a “Communication on an External Strategy for
Effective Taxation”, aimed at reinforcing cooperation
with international partners in fighting tax avoidance
and promoting fair taxation globally through
international standards and a common approach;
• a recommendation to Member States on
how to prevent tax treaty abuse (“Tax Treaties
Recommendation”).
RATIONALE OF THE PROPOSED DIRECTIVE
The proposed Anti-Tax Avoidance Directive (“Draft”)
responds to the need for a stronger and more co-
ordinated EU approach against corporate tax abuse.
Considering that most EU Member States (22 out of 28),
as members of OECD, have committed to implement
the measures contained in the 15-Actions BEPS Final
Reports, the EU Commission acknowledges that an
unilateral, not coordinated implementation of BEPS by
each Member State, far from attaining the intended
purpose, could create new loopholes and mismatches
that can be exploited by companies seeking to avoid
taxation, thereby actually hampering EU and OECD
efforts to prevent such practices.
Indeed, the Commission considers that actions
undertaken by each single Member State moving on
its own cannot sufficiently achieve those aims. On the
contrary, such an approach would only replicate and
possiblyworsen theexisting fragmentation in the internal
market and “perpetuate the present inefficiencies and
distortions in the interaction of a patchwork of distinct
measures”.
It is therefore seen as more effective for the purpose
of tackling cross-border tax avoidance practices to
provide a common framework for the implementation
of BEPS Actions into Member States’ national systems
in a coherent and coordinated fashion by creating a
“minimum level of protection for national corporate
tax systems” across the EU and the proposed Directive
aims at an “essential minimum degree of coordination
within the Union for the purpose of materialising its
objectives”.
Direct taxation is the preserve of EU Member States,
however, and EU law requires unanimous agreement
among all Member States for passing measures relating
to areas where their sovereign legislative power is
granted. The text therefore set principle-based rules and
leaves the details of their implementation to Member
States, “on the understanding that they are better
placed to shape the precise elements of the rules in a
way that best fits their corporate tax systems”.
DETAIL OF THE MEASURES
The Draft is broadly inclusive and aims to all taxpayers
subject to corporate tax in a Member State, including
permanent establishments, located within the EU, of
corporate taxpayers which are not themselves subject
to the Directive.
The proposed Directive targets situations where
taxpayers act against the actual purpose of the law,
exploiting disparities between national tax systems
in order to reduce their final tax burden, be it low tax
rates, double deductions or mismatches – when cross-
border transaction are structured so that income remain
untaxed by making it deductible in one jurisdiction whilst
it is not included in the tax base across the border either.
The outcome of such tax avoidance practices distorts
business decisions in the internal market and ultimately
affect the fair functioning of the internal market. The
proposed Directive lays, therefore, down anti- tax
avoidance rules in six specific fields: deductibility
of interest; exit taxation; a switch-over clause; a
general anti-abuse rule (GAAR); controlled foreign
company (CFC) rules; and a framework to tackle hybrid
mismatches.
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