Anti-Tax Avoidance Directive

Counteracting aggressive tax planning is high on the EU legislator’s agenda

The Anti-Tax Avoidance Directive, or ATAD, sets out the following five key anti-avoidance measures to counteract some of the most common types of aggressive tax planning:

The controlled foreign company (CFC) rule serves to deter profit shifting to a low-tax or no-tax country. Exit taxation is applied to prevent companies from avoiding tax when relocating assets, and the interest limitation rule aims to discourage artificial debt arrangements designed to minimise taxes. Preventing companies from exploiting national mismatches for tax avoidance purposes is the goal of the hybrid mismatch rule. A general anti-abuse rule serves as a catch-all provision where other rules do not apply.

The transposition of ATAD will have a significant impact on the current Luxembourg tax legislation. ALFI has been actively involved in assessing its implications, particularly on alternative investment fund structures.

Vilma Domenicucci
Senior Tax Advisor, ALFI