New EU rules have been created to eliminate the main loopholes used in corporate tax avoidance, entered into force on 1 January 2019. The rules are built on global standards developed by the OECD in 2015 on Base Erosion and Profit Shifting (BEPS).
According to the new directive, all Member States must apply new legally binding anti-abuse measures that target the main forms of tax avoidance used by large multinationals, and with the support of the new rules, Member States will be able to tackle tax avoidance schemes in cases where other anti-avoidance provisions cannot be applied. All Member States may tax profits moved to low-tax countries where the company does not have any genuine economic activity. Furthermore, the amount of net interest expenses that a company can deduct from its taxable income will be limited.
Further rules prevent companies from exploiting mismatches in the tax laws of two different EU countries in order to avoid taxation. The provisions ensuring that gains on assets such as intellectual property moved from a Member State’s territory become taxable in that country will enter into force as of 1 January 2020.