No Match Found
If you have operations or investments in the European Union, the EU Anti-Tax Avoidance Directive (ATAD and ATAD II) may increase your tax burden.
The EU Anti-Tax Avoidance Directives (ATAD I & II "ATAD") form part of a larger anti-tax avoidance package adopted by the European Union in response to the OECD's BEPS action plan.
ATAD contains the following five anti-abuse measures:
A part of ATAD (referred to as ATAD II, in place since January 2020) is targeted at so-called hybrid mismatches which result in negative tax outcomes (double non-taxation). Hybrid mismatches are evaluated by comparing the tax treatments of entities or transactions in different jurisdictions.
The impact on multinationals with operations in the EU can be significant, especially because ATAD II may result in a denial of deductions or obligatory inclusion of certain actual or deemed payments that were so far “unproblematic” from a tax point of view.
The ATAD II analysis should not be limited to “obvious” hybrid entities and instruments but should also be done for:
The international tax landscape will continue its transformation but the general trend is obvious: Pillar 2 of the OECD’s new "Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy" aims to establish a similar system, focusing on new income inclusion rules and certain deductibility restrictions where a minimum level of tax is not achieved.
Although the fund industry is not the main focus of ATAD II, the new rules are expected to have a significant impact where alternative asset classes are invested in Europe.
Under the new rules, interest deductions in investment countries may depend on the exact tax treatment of the same investment by each of the investors. This, in turn, means that the manager of the investment needs to know and evaluate how investors are taxed.
Therefore, the new rules are particularly relevant for the fund industry at fund and platform level, as well as from an investment structuring perspective, so it’s time to review your investment structures in order to maintain efficient tax return.
For further information, talk to our experts:
This is all urgent and it is therefore crucial to comply with the new rules. We are reviewing the practical impact of the directive including working closely with our client and our PwC network colleagues in EU member states.