July 12, 2016 the Council of the European Union adopted Directive №2016 / 1164 against tax evasion (hereinafter – the Directive), which entered into force on 8 August 2016. This Directive is one of the components of the package of measures which was proposed by the European Commission within the framework of the so-called Plan BEPS (Action Plan erosion of the tax base and the withdrawal of income from the tax).
The main purpose of the Directive is the fight against the schemes of tax evasion, which are used by many companies due to differences between the tax systems of the Member States of the European Union (hereinafter – EU).
It should be noted that the Directive applies to all corporate tax payers in the territory of the Member States, including their subsidiaries located in third countries
Next, we will focus on the basic methods of combating tax evasion:a) rules on controlled foreign companies (Controlled Foreign Company Rules – CFC). These rules allow tax authorities to charge taxes on undistributed earnings of foreign companies controlled by residents of EU countries. Thus, all EU member states will now have the authority to tax income, which was relocated to countries with low tax, in the event that the company does not have any genuine economic activity in these countries; b) tax on capital gains in the derivation of assets (Exit Taxation). Now corporate taxpayers will not be able to reduce their tax bills by moving their tax residency or assets in countries with low tax rates, as the new regulations provide tax market value of the asset at the time of transfer from one Member State to any other State. Thus, the derivation of its assets to another EU jurisdiction should assess the value of such assets and determine the capital gain that was accumulated during the stay of the assets in the EU. If there is a positive indicator of capital gains, the tax authorities of the country from which the assets are derived, can impose these amounts applicable taxes; c) The new rules limiting the possibility Directive taxpayer to deduct expenses as a percentage of over 30% rate EBITDA (earnings before interest, taxes, depreciation and amortization). This rule before interest directed against financing schemes undertaken by the loan of his own company, allowing the company funded include interest payments on the loan to their costs. It should be noted that except for the application of this rule are credit agreements which were concluded by 17 June 2016 (not excluding all subsequent modifications of such contracts), as well as loans to finance long-term projects for public infrastructure, in case kompaniya- project operator, assets and income are within the EU; d) Regulations inconsistencies hybrid (hybrid mismatches). These rules exclude the possibility to take advantage of discrepancies between tax systems of different countries to reduce their tax liabilities. Currently Directive covers only non tax systems within the EU. Note, however, that the Council has applied to the European Commission to put forward a proposal for extension of such rules and in third countries. e) The general rule on the Prevention of Fiscal Evasion (general anti-avoidance rule). This rule introduced to combat such schemes are not directly contradict the current legislation, but the result of which results in a tax benefit. Also, special attention should be paid to the chronology of implementation of the Directive into the legislation of EU member states, namely:
- Member States to 31/12/2018 Year should adopt and publish the laws, other regulations necessary for the implementation of the Directive and apply them on 01.01.2019
- The laws and other legal acts adopted under the provisions of the Directive on capital gains tax in the derivation of assets should be adopted and published by Member States to 31/12/2019, and entered into force on 01.01.2020 year.
- Member States, legislation which as of 08.08.2016 meets the rules to prevent risks BEPS, have the right to implement the provisions of Directive no later 01.01.2024 year.