(or Council Directive (EU) 2016/1164 from 12^th June 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market)

Fighting base erosion and profit shifting, European Commission issued a directive which implements the conclusions of the OECD BEPS initiative (Base Erosion and Profit Shifting) into European law. This Directive applies only to legal persons and their long-term places of business. The Directive does not apply to tax transparent entities. Member States should apply these measures and implement them into national legislations until the end of 2018.  Article 5 (Exit taxation) is an exception as it is to be implemented until the end of 2019. Another exception is granted to those Member States which have already implemented into their domestic laws conclusions from BEPS Action 4 Report published by the OECD at the end of last year. The latest date for implementation of these rules for limiting interest deductions is the year 2023.

What does this Directive aim to regulate? The Directive adopts conclusions of the OECD initiative shown in 15 chapters of the BEPS document. It must be pointed out that it does not adopt the same wording and that it does not adopt all of them and adds some new ones. The following BEPS conclusions are implemented into the Directive:

• No. 1 – To neutralize the effects of hybrid mismatch arrangements
• No. 2 – Controlled foreign company (CFC) rule
• No. 3 – Limiting base erosion involving interest deductions

The Directive is concerned with the following five problems, rules for which shall be implemented into national tax laws of EU Member States:

1. Limiting interest deductions to 30% of applicable EBITDA (earnings before interest, taxes, depreciation, and amortization)
2. Exit taxation (taxation when re-locating assets)
3. General anti-abuse rule
4. Controlled foreign company (CFC) rule
5. Establishing rules for hybrid mismatches and hybrid structures which allow for double non-taxation of the same income in two different Member States or more, or double deduction of costs in two Member States.

With respect to implementation of the Directive into Czech tax laws the Ministry of Finance issued a publication on 14^th March that says that the expected legislative process of implementation will begin at the beginning of 2018. It further suggest variations of individual ATAD articles for implementation.