Council agrees its position on hybrid mismatches with third countries


On 21 February 2017, the Council of the EU, meeting through its Economic and Financial Affairs (ECOFIN) Council, agreed its position on rules aimed at closing down ‘hybrid mismatches’ with the tax systems of third countries (so called ATAD II).

Following to the European Commission’s proposal on amendments to the Anti-Tax Avoidance Directive (ATAD) as part of the Corporate Tax Package on October 25, 2016, the Council reached an agreement on the Presidency compromise presented last week.

The proposal seeks to prevent exploitation of disparities between two or more tax jurisdictions to reduce the overall tax liability. The proposal thus addresses hybrid mismatches with regard to non-EU countries, which were already covered by the ‘anti-tax-avoidance directive’ adopted in July 2016.

According to the Council’s press release, the Council reached a compromise on the following issues:

  • for hybrid regulatory capital, a temporary carve-out from the rules will be established for the banking sector. The European Commission will be asked to present a report assessing the consequences;
  • for financial traders, a delimited approach in line with the OECD will be followed;
  • as regards implementation, a longer timeline is foreseen than that set for the July 2016 directive. Implementation is set for 1 January 2020 (one year later), and for 1 January 2022 as concerns one specific provision.

The final draft directive will be submitted for formal adoption by the Council after the delivery of the European Parliament’s Opinion and the translation of the text in all official languages.


The Directive requires the unanimous backing of all EU Member States in the ECOFIN to be adopted. However, as a general approach has been reached on the Presidency compromise, the adoption will take place in the upcoming ECOFIN meetings.

You can read the Council of the EU’s full press release here. In addition, we can refer to a PwC EUDTG newsletter in this respect, which you can read here.


For more insights and to understand the implications for your organisation, please contact Pieter Deré.