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ECOFIN agrees closure of hybrid mismatch loophole
Zone(s): Europe, Cyprus ¦ Sector(s): Taxation
Hybrid loan arrangements are financial instruments that have characteristics of both debt and equity. The proposed amendment to the EU Directive would prevent double non-taxation by providing that the member state of the parent company would only refrain from taxing profits from the subsidiary to the extent that such profits were not deductible by the latter. This has been proposed as some member states classify payments from hybrid loan arrangements as tax deductible debt interest, opening up opportunities for manipulation.