The EU Anti-Tax-Avoidance Directive: Taxing Payments to U.S. S Corps

On January 1, 2020, the EU’s second anti-tax avoidance directive (ATAD 2, 2017/952/EU) became effective.1 ATAD 2 addresses nontaxation arising out of hybrid mismatches with companies or permanent establishments in third countries (that is, countries outside the EU). This article explores how payments from EU companies to U.S. subchapter S corporations will be affected by ATAD 2. It also examines the impact of the implementation of ATAD 2 in Dutch law for a hypothetical structure whereby a U.S. corporate entity taxed as a subchapter S corporation (U.S.Inc.) conducts business in the Netherlands through a Dutch BV (limited liability company).

 

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Frederik Boulogne is an international tax adviser with BDO Netherlands in Amsterdam, and Jack Carlson is an international tax managing director with BDO USA in Chicago.

 
This article was originally published by Tax Notes International on January 27, 2020
1Council Directive (EU) 2017/952 of May 29, 2017, amending Directive (EU) 2016/1164 as regards to hybrid mismatches with third countries (ATAD 2).
 

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