The European Council has adopted a directive aimed at reducing corporate tax avoidance by large companies and their subsidiaries (the Directive). The Directive includes interest deductibility and exit taxation rules which are set to come into force by 2018.

Member states will have until 31 December 2018 to transpose the Directive into their national laws and regulations, except for the exit taxation rules which will come into force from 31 December 2019.

The Directive is part of a January 2016 package of Commission proposals to strengthen rules against corporate tax avoidance. The package builds on the OECD’s recommendations in 2015 to address tax base erosion and profit shifting (BEPS), endorsed by G20 leaders in November 2015.

The Directive covers all taxpayers that are subject to corporate tax in a member state, including subsidiaries of companies based in other countries.

The Directive was adopted without discussion at a meeting of the Economic and Financial Affairs Council on 17 June 2016.

A copy of the Directive can be found here.