On the 21st February 2017, the Economic and Financial Affairs Council (ECOFIN) within the EU Council approved new rules to help prevent tax avoidance via non-EU countries.  The EU has made tax transparency and combatting tax avoidance within the EU one of its main goals in recent years.  In fact, in 2016, an Anti-Tax Avoidance Directive was finalised.  This Directive set out anti-abuse measures against tax avoidance and included provisions curtailing hybrid mismatches between EU member states.  Hybrid mismatches are situations wherein different tax rules in different countries allow multinational companies to exploit the loopholes of the law and avoid being taxed in the EU.

The new provisions, amending this newly formed Directive, further help curtail tax-avoidance by prohibiting and neutralising hybrid mismatches involving third countries (non-EU countries).  In fact, the new provisions establish minimum rules that neutralise such hybrid mismatches where at least one of the parties involved is a corporate taxpayer in an EU member state.  These rules will come into force in January 1, 2020 with a longer phasing-in period of 2022 for one article regarding reverse hybrid mismatches.

The Anti-Tax Avoidance Directive was a vital step in the tackling of taxation within the EU and it provided for significant effect on taxation of multinational companies operating in the EU.  These new provisions further expand the scope of the Directive and the effect it shall have on the targeted corporate entities.