New EU Rules to Eliminate the Main Loopholes in Corporate Tax Practice

On 1 January 2019, the EU Member States shall initiate the procedure to apply new anti-abuse measures in the areas of corporate tax planning which is practised mostly by large multinational entities. The new EU anti-abuse measures build on the standards developed by the Organisation for Economic Co-operation and Development (OECD) on Base Erosion and Profit Shifting (BEPS) in 2015.

The new EU Rules target corporations which move to low-tax countries where the corporation does not have a genuine economic activity in that Member State. The new measures aim to discourage legal entities from using excessive amount of interest payments to minimise taxes. Furthermore, each Member State will be able to tackle with tax avoidance schemes where other provisions cannot be applied. The purpose of the new EU Rules is to ensure that each Member State duly implements the appropriate measures against tax avoidance.

The European Commission aims to introduce further rules to prevent legal entities from exploiting tax law of two different EU Member States for tax avoidance on 1st of January 2020.

How MPC can help?

• Assistance and consulting on tax planning matters from the Set up and throughout the life of a special purpose vehicle/ legal entity

• Advice on operations of the Company in Cyprus in order to achieve genuine substance

• Review of existing structures to ensure compliance and tax savings across the group of companies