Expected Impact on 10 EU Countries

Tax laws across Europe are undergoing massive reforms with one key component being the ongoing work of the Organisation for Economic Co-operation and Development (OECD) and their Base Erosion and Profit Shifting (BEPS) 15 Point Action Plan. According to a new report from KPMG International, many European governments have expressed their commitment to address BEPS and many have already made changes to their tax codes in anticipation of current and future OECD recommendations.

This KPMG International report examines the OECD’s BEPS 15 Point Action Plan and its current and expected impact on 10 European countries (Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Switzerland, and the UK).

So what will the European tax landscape look like in the future? While specific answers are not yet possible, the report discusses a number of areas of particular interest such as:

  • Country-by-country (CbyC) reporting
    Even companies that already take a cautious approach are performing impact evaluations to determine the skills and resources they will need to comply with CbyC reporting. CbyC will require that results from several different jurisdictions be translated into a single standard.
  • Substance requirements
    Current tax treaties, put in place to prevent double taxation, are now proving ineffective in preventing double non-taxation. It is expected that most countries will eliminate structures that permit companies to claim their profits in jurisdictions where they have no substance in terms of office space, tangible assets or employees.
  • Hybrid mismatches
    There is widespread acceptance among European countries examined that tax planning based on hybrid mismatches will be curtailed. Switzerland and the United Kingdom have already moved to prevent companies from using hybrid structures for the sole purpose of gaining tax advantages
  • Transfer pricing
    Many countries in Europe have already indicated their intention to tighten transfer pricing rules in accordance with changes to the OECD guidelines.

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EMA-BEPS-report.pdf