Analysis of EU's Directive 2016/1164 Regarding Anti Taxavoidance in a Danish Perspective

Abstract

The purpose of this thesis is to determine if and to which extent the Danish tax laws regarding hybrid mismatches needs changing to be in accordance with the two directives 2016/1164 and 2017/952 as put forward by the European Union. The regulations in the directives shall be implemented in all EU members tax laws by 12/31-2019 for the regulations regarding hybrid mismatches and by 12/31-2017 for the regulations regarding reverse hybrid mismatches. This thesis focuses on the directives articles 9 and 9a, which seeks to neutralize double deduction, deduction/no inclusion as well as double no inclusion which arises within a control group or a structured arrangement where a person is regarded as a taxable person in one jurisdiction and as a transparent person in the contracting jurisdiction. Selskabsskattelovens §§ 2 A and 2 C were adopted in Danish tax law to neutralize the abovementioned issues that arises when an American company uses the check-the-box rules under IRC 7701 on a person based in Denmark. When an American company uses the check the box rules on a taxpayer based in Denmark and that taxpayer pays interest to the company, the taxpayer is eligible for deduction of that amount in their income taxes, however the company will not include the interest in their income taxes as they define the interest as an internal transaction. This is an example of deduction/no inclusion which lead to the implementation of Selskabskskattelovens § 2 A. Selskabskskattelovens § 2 C were adopted to ensure the opposite situation will not occur. The directives generally have wider definitions in regards of control of a person, related persons etc., than those in the Danish tax laws. The Danish tax laws will therefor need to adopt these definition as well as ensuring that the regulations will apply to all situations which the rules in the directives apply to. The thesis suggests the changing of the two existing laws, Selskabsskattelovens § 2 A and § 2 C, and the addition of two new laws to Selskabskatteloven. The changes in §§ 2 A and 2 C implements the definition as defined in the directives while the two additional laws will ensure, that hybrid mismatches which arises from structured arrangements will be neutralized either in the payer jurisdiction or in the payee jurisdiction when Denmark is one of those jurisdictions.