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02 July 2019

ATAD2 measure: Dutch cabinet submits new bill against tax avoidance

Today, 2 July, the State Secretary for Finance has sent a bill to the Lower House of Dutch parliament that, implementing ATAD2, aims to put an end to structures in which companies avoid tax by making use of the differences in tax systems of countries, the so-called hybrid mismatches.

The bill ATAD2 (Anti Tax Avoidance Directive) prevents internationally operating companies from responding to differences between the corporate tax systems of countries. These so-called hybrid mismatches aim to achieve, for example, that a payment is deductible in one jurisdiction, but not taxed anywhere, or that one payment is deductible several times.

The best-known Dutch example of a hybrid mismatch is the CV/BV structure, also known as the 'savings bank at sea'. This structure has enabled US companies in particular to postpone the taxation of their global profits for a long time. With the measures in ATAD2, the fiscal attractiveness of this structure disappears.

ATAD2 is a follow-up to ATAD1, which entered into force on 1 January 2019 and tackles other forms of tax avoidance. This has led, among other things, to the introduction of the earnings stripping measure, a general interest deduction limitation in corporate income tax. As stated, the bill presented to the Lower House today contains measures against hybrid mismatches.

The intention is that the majority of the measures in the bill to implement ATAD2 will come into force on 1 January 2020. The other EU member states will also have to introduce ATAD2.

For more information or additional input please contact Anton Louwinger.