The Directive sets out 5 key anti-avoidance measures, and 3 of the agreed measures come into force on 1st January. The new rules will ensure that all Member States implement coordinated measures against tax avoidance, to boost their collective defences against aggressive tax planning. It also sets out a common approach to tackling external threats of tax avoidance and to help prevent companies from shifting untaxed profits out of the EU –
- Controlled Foreign Company (CFC) rule: To deter profit shifting to no or low tax countries;
- Interest Limitation: To discourage companies from creating artificial debt arrangements designed to minimise taxes; and
- General Anti-Abuse Rule: To counter-act aggressive tax planning when other rules do not apply.
Further rules governing hybrid mismatches to prevent companies from exploiting mismatches in the tax laws of 2 different EU countries in order to avoid taxation, as well as measures to ensure that gains on assets such as intellectual property moved from a Member State’s territory become taxable in that country (exit taxation rules) will come into force as of 1st January 2020.