The Council adopted the anti-tax avoidance directive ("ATAD", Council Directive (EU) 2016/1164) in 2016. The directive establishes a number of legally binding measures against aggressive tax planning. In particular, it aims to address situations where corporate groups take advantage of disparities between national tax systems in order to reduce their overall tax liability. For this purpose, the directive provides for legal provisions against aggressive tax planning relating to, in particular, interest limitation, exit taxation rules, controlled foreign company rules, general anti-abuse rules or rules on hybrid mismatches. The directive contains several significant modifications as compared to earlier practice, including the interest limitation rule, that may affect the functioning of Hungarian companies, and likewise, new entitlements for relief may be adopted. In respect of the interest limitation rule, according to the provisions of the directive, exceeding borrowing costs shall be deductible in the tax period in which they are incurred only up to 30% of the taxpayer's earnings before interest, tax, depreciation and amortisation (EBITDA).
The Member States will have to transpose most of the provisions of the directive (including the interest limitation rule) into their national laws and regulations until 31 December 2018.
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