EU tightens tax controls on multinational companies

Media In – Brussels – 30 December 2018 WAM
The new EU rules to eliminate the main loopholes used in tax avoidance of multinational companies will enter into force on January 1.
The European Commission said in a statement today that new rules would be introduced to eliminate the most common tax avoidance practices. As of January 1, all EU member states must apply new legally binding measures to combat abuse targeting key forms of tax avoidance. Practiced by large multinational corporations.
The new rules are based on global standards developed by the Organization for Economic Co-operation and Development (OECD) in 2015 on basic evasion and conversion of profits, and should help prevent the transfer of profits outside the EU where they are not taxable.
Practically all Member States will now tax the profits transferred to low-tax countries where the company has no real economic activity under the rules of foreign controlled companies.
To induce companies to avoid using excess interest payments to reduce taxes, Member States will determine the amount of net interest expense that the Company can deduct from taxable income within the interest reduction rules.
Member States will be able to deal with tax avoidance schemes in cases where other provisions to prevent evasion can not be applied as a general rule against abuse.
The European Commission says that as of January 1, 2020, more rules governing hybrid mismatch will begin to prevent companies from exploiting the mismatch in the tax laws of two different EU countries to avoid taxes.