CHARACTERISTICS OF THE CONCEPT OF HYBRID TAX AVOIDANCE STRUCTURES. ATAD 2

Author
, Graduate student at the Department of Financial Law, Ukraine, Kharkiv

In heading

 Law;

Signed print

 27.06.2024

Issues number

 2024 - 2 (57)

Page

 83-94

Type of articles

 Scientific article

Code UDK

 347.73:336.225.68

ISSN print

 2411-5584

Abstract

 Problem setting. The research of tools for fighting the abuse of tax advantages in transactions with a foreign element is definitely a relevant topic for Ukraine and the world as a whole.
Recent research and publication analysis. ATAD 2 initiatives provided for by EU legislation and initiatives provided for by BEPS Action 2 are not yet reflected either in the legislation, or in the judicial practice of administrative proceedings, or in the legal doctrine of Ukraine.
Paper objective. The purpose of the article is to analyze the tools for fighting the abuse of tax advantages in transactions with a foreign element within the framework of EU legislation (ATAD 2) and the initiatives provided for by BEPS Action 2, to analyze international approaches and trends to opposition such abuses, to form conclusions on the effectiveness of these tools and development of recommendations that will contribute to their effective and flexible harmonization in the legislation of Ukraine.
Paper main body. Hybrid structures are defined as structures that allow the use of differences in the tax interpretation of similar (1) contractual/financial instruments, (2) types of business entities and (3) cross-border transfers under the laws of two or more jurisdictions with the purpose to achieve double non-taxation or long-term deferral of such taxation, which after several years economically reflects a similar effect. Hybrid structures can significantly reduce the tax burden for taxpayers.
The use of preventive mechanisms to fight against such hybrid structures is an urgent issue to reduce the level of losses for country budgets.
Regulation of most of the elements of hybrid structures defined in the OECD Report «Instruments of hybrid structures» is absent in the TC of Ukraine which is more about defining certain elements than regulating them concerning cross-border transactions.
Conclusion of the research. In the article the general characteristics of tools for fighting with hybrid structures were analyzed, their classification and main features were given. However, the examples of the provisions of ATAD 2 are not exhaustive, since such regulations originate from BEPS Action 2, which first clarified and regulated the issue of the application of hybrid structures. In BEPS Action 2, there are also other examples of the application of relevant hybrid structures, which are provided for by the legislation of other jurisdictions.
The Parliament and the Government of Ukraine should carry out significant tax reform and supplement the TC and by-laws in the fight against hybrid structures. Multinational corporations registered in Ukraine should pay close attention to such initiatives.
Short Abstract for an article
Abstract. The general concept of hybrid tax avoidance structures in the context of the EU Anti-Tax Avoidance Directive (ATAD 2) is explored in the article. Such structures can be used by international corporations to reduce the tax burden due to differences in national tax systems. These structures are based on the use of differences in the classification of legal entities and financial instruments established by different countries. The approximate amount of losses caused to the budgets of different countries due to the use of hybrid structures isindicated, and methods of combating them are given. The historical prerequisites for the need to implement mechanisms to combat hybrid structures are outlined in the article, an analysis of the key provisions of ATAD 2 is carried out, and the characteristic features of such structures are described with an emphasis on practical aspects. In addition, the current state of tax legislation of Ukraine in terms of mechanisms for combating hybrid structures, which requires adaptation to the provisions of ATAD 2 in order to expand its
efficient impact, is analyzed in the article.

Keywords

 hybrid structures, mechanisms for fighting, tax abuse, tax avoidance, ATAD, ATAD 2, BEPS.

Reviewer

External reviewer

Article in PDF

 Economic Theory and Law, 2024-2-83-94

Bibliography

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Code DOI

 https://doi.org/10.31359/2411-5584-2024-57-2-83

27.06.2024