The European Parliament’s Economic and Monetary Affairs Committee has approved the text - by a majority of 20 votes to 15, with 21 abstentions - of the Commission’s proposal for an EU anti-tax avoidance directive.
The directive supports the OECD BEPS action plan, building on the principle that tax should be paid where profits are made. It includes measures to block common tax avoidance practices, with rules on deductibility of interest, exit taxation, a ‘switch-over’ clause for foreign taxes, a general anti-abuse rule, controlled foreign company rules and a framework to tackle hybrid mismatches.
However, MEPs are more ambitious than the Commission in relation to the ‘switch-over’ rule, recommending a minimum rate of 15% for foreign income taxed outside the EU, below which exemption would be denied and the difference would become payable. The Commission proposed denying exemption where foreign income is taxed at a rate lower than 40% of the national rate.
The committee also recommends tougher restrictions on deductibility of interest, which it would like to see limited to the higher of 20% of earnings or €2m, spread over no more than five years. The Commission has proposed 30%, with no time limit. See http://bit.ly/1RoChQS.
EU ministers will need to decide unanimously on the Commission proposal. After a policy debate at the 25 May Council of Finance Ministers (ECOFIN), it agreed to postpone an agreement on the dossier to its meeting on 17 June 2016.
The European Parliament’s Economic and Monetary Affairs Committee has approved the text - by a majority of 20 votes to 15, with 21 abstentions - of the Commission’s proposal for an EU anti-tax avoidance directive.
The directive supports the OECD BEPS action plan, building on the principle that tax should be paid where profits are made. It includes measures to block common tax avoidance practices, with rules on deductibility of interest, exit taxation, a ‘switch-over’ clause for foreign taxes, a general anti-abuse rule, controlled foreign company rules and a framework to tackle hybrid mismatches.
However, MEPs are more ambitious than the Commission in relation to the ‘switch-over’ rule, recommending a minimum rate of 15% for foreign income taxed outside the EU, below which exemption would be denied and the difference would become payable. The Commission proposed denying exemption where foreign income is taxed at a rate lower than 40% of the national rate.
The committee also recommends tougher restrictions on deductibility of interest, which it would like to see limited to the higher of 20% of earnings or €2m, spread over no more than five years. The Commission has proposed 30%, with no time limit. See http://bit.ly/1RoChQS.
EU ministers will need to decide unanimously on the Commission proposal. After a policy debate at the 25 May Council of Finance Ministers (ECOFIN), it agreed to postpone an agreement on the dossier to its meeting on 17 June 2016.
