It enabled US tech giants such as Microsoft and Google to use shell companies in Ireland and the Netherlands to shift profits on to non-EU tax havens, by exploiting differences in national laws known as “hybrid mismatches”.
It was made possible, in part, by the “double Irish” loophole that let foreign companies set up in Ireland without being tax resident here.
The Government began phasing out the double Irish in 2015, but it remains in place until 2021 for companies already using it.
A spokesman for the Department of Finance said the Government was “happy” with the deal.
The rule change has to be run by MEPs before it can become law, but parliamentarians don’t have a veto on it. “Today is yet another success story in our campaign for fairer taxation,” said EU economics and tax chief Pierre Moscovici of the deal.
The hybrid mismatch rule is one of a set of laws tabled last October by the commission, which includes the common consolidated corporate tax base (CCCTB).
The CCCTB is the most fundamental overhaul of corporate tax law in the EU to date, and would radically change how companies calculate their corporate tax bills, and where those bills are paid.
It is based on a 2011 draft that was shelved after years of infighting by EU countries. “Discussions on the commission’s CCCTB proposal have just begun,” a Department of Finance spokesperson said.