- A general limitation of interest deduction up to 30% of the EBITDA of the company. However, the first 3 million of interest does not have to be limited;
- Mandatory exit taxation in the case of the transfer of assets from a head office or permanent establishment out of a Member State, in the case of moving of the tax residence out of a Member State and in the case of the moving of a permanent establishment out of a Member State;
- A general anti-abuse rule (GAAR) designed to counter purely artificial arrangements with the sole intention of obtaining a tax advantage;
- An obligation on Member States to effectively tax the income of controlled foreign subsidiaries (CFCs) in low-tax jurisdictions. "Low Tax" means the corporation tax paid is less than 50% of the tax that would be payable in the Member State of the parent company;
- A framework to address hybrid mismatches. This means that different Member States give a different characterisation to the same entity or payment, whereby for example double deduction can be effected.
Most of the measures have to be transposed by Member States into national legislation at the latest on 31 December 2018. In this way, most of the new rules will be effective from 1 January 2019. However, a transitional arrangement up until 1 January 2024 covers the limitation of interest deduction and other provisions.
In future, we will inform you about the specific effects of various new regulations. Please do not hesitate to contact us if you have any specific questions about the impact of this directive on your business.