The Dutch government published a preliminary proposal implementing rules on hybrid mismatches as required under the amended EU Anti-Tax Avoidance Directive (ATAD2). The implementation of ATAD2 in the Dutch legislation will lead to changes in the 1969 Corporate Income Tax Act. The proposal is expected to lead to a decrease in tax avoidance through hybrid mismatch structures.
There are three types of rules in the proposal initiated by the government as follows:
The proposal goes beyond the EU directive by excluding an optional exemption for financial traders.
However, it also specifies that the proposal applies only to mismatches with a hybrid element and excludes mismatches caused by differing approaches to transfer pricing or the absence of corporate tax in one jurisdiction. In principle, only hybrid mismatches between related entities are covered by the proposal unless there is a structured arrangement.
The Dutch Ministry of Finance opens a consultation on this proposal. Interested parties are invited to react to consultation documents and are allowed to include the whole consultation document in their reaction. The consultation will run until 10 December 2018.
The proposal is proposed to apply the first two types of rules as from 1 January 2020 and the rule on reverse hybrid entities as from 1 January 2022, both in accordance with ATAD2.
Source: Dutch Government - Press Release
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