The Anti-Tax Avoidance Directive (Council Directive (EU) 2016/1164) contains legally binding anti-abuse measures which all Member States are obliged to apply to counter common forms of aggressive tax planning.
The Directive creates a minimum level of protection against corporate tax avoidance in the EU while ensuring a fairer and more stable environment for businesses.
The Anti-Tax Avoidance Directive contains five measures:
- Interest Limitation Rules discourage debt arrangements designed to minimise taxation
- Exit Taxation Rules prevent companies from avoiding tax when relocating assets
- The Controlled Foreign Company (CFC) Rule deters profit shifting to a dependent company in a low-tax country to reduce taxable profits
- The General Anti-Abuse Rule counters aggressive tax planning when other rules don’t apply
- The Hybrid Mismatch Rule prevents companies from exploiting national mismatches to avoid taxation
All rules are in force as of 1 January 2020 except the Hybrid Mismatch Rule, which has been in force since 1 January 2022.