The European Commission Anti-Tax Avoidance Package contains measures including proposals for two directives, described as having the aim of preventing aggressive tax planning, boosting tax transparency and creating a level playing field for all businesses in the EU.

The package consists of two proposed directives and recommendations on how Member States should reinforce their tax treaties against abuse by aggressive tax planners, in an EU-law compliant way.

The Anti-Tax Avoidance Directive proposes a set of legally binding anti-avoidance measures, which all Member States should implement to shut off major areas of aggressive tax planning. The directive focuses on six anti-avoidance measures;

• Controlled Foreign Company (CFC) rule: to deter profit shifting to no or low tax countries,
• Switchover rule: to prevent double non-taxation of certain income
• Exit Taxation: to prevent companies from re-locating assets purely to avoid taxation
• Interest Limitation: to discourage companies from creating artificial debt arrangements designed to minimise taxes
• Hybrids: to prevent companies from exploiting national mismatches to avoid taxation
• General Anti-Abuse rule: to counter-act aggressive tax planning when other rules don’t apply

The Administrative Cooperation Directive is presented in revised form for the purpose of introducing country-by-country reporting between tax authorities on key tax-related information on multinationals.

The communication on an External Strategy for Effective Taxation sets out a coordinated EU approach against external risks of tax avoidance and to promote international tax good governance.

The Package also includes a Chapeau Communication and Staff Working Document, which explain the political and economic rationale behind the individual measures.

The proposed directives must be submitted to the Council of the European Union for consideration. Tax measures such as these two directives must be adopted unanimously by the Member States in order to be legally enforceable.