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The Role of Pillar Two in Neutralizing Hybrid Mismatches: Complementary to or Overlapping with ATAD?

Ionescu, Renata-Adelina LU (2025) HARN60 20251
Department of Business Law
Abstract
This thesis investigates and reflect on the interplay between the EU’s Anti-Tax
Avoidance Directive (ATAD) and the OECD’s Pillar Two framework in neutralizing
hybrid mismatch arrangements. The research goal is to determine the extent to which
these regimes complement or overlap in mitigating hybrid mismatch outcomes. Final
findings reveal that ATAD applies a direct, transaction-level approach, by
mechanically denying deductions or mandating income inclusion, while Pillar Two
provides an indirect, formula-driven back-stop, levelling the effective tax rates
across jurisdictions through GloBE income adjustments and top-up taxes. Together,
these rules work hand in hand to strongly discourage companies from using hybrid
mismatches tax... (More)
This thesis investigates and reflect on the interplay between the EU’s Anti-Tax
Avoidance Directive (ATAD) and the OECD’s Pillar Two framework in neutralizing
hybrid mismatch arrangements. The research goal is to determine the extent to which
these regimes complement or overlap in mitigating hybrid mismatch outcomes. Final
findings reveal that ATAD applies a direct, transaction-level approach, by
mechanically denying deductions or mandating income inclusion, while Pillar Two
provides an indirect, formula-driven back-stop, levelling the effective tax rates
across jurisdictions through GloBE income adjustments and top-up taxes. Together,
these rules work hand in hand to strongly discourage companies from using hybrid
mismatches tax strategies. The thesis concludes that, although the two regimes are
applied successively, not in parallel, they require clearer sequencing and
consolidated guidance to prevent double taxation, especially in consideration of Art.
3.2.7 of the GloBE Model Rules, reduce compliance burdens, and strengthen the
global tax coherence. (Less)
Please use this url to cite or link to this publication:
author
Ionescu, Renata-Adelina LU
supervisor
organization
course
HARN60 20251
year
type
H1 - Master's Degree (One Year)
subject
keywords
Hybrid Mismatches, Pillar Two, ATAD, BEPS, Linking Rules, Double (Non-)Taxation
language
English
id
9192661
date added to LUP
2025-06-05 10:47:05
date last changed
2025-06-05 10:47:05
@misc{9192661,
  abstract     = {{This thesis investigates and reflect on the interplay between the EU’s Anti-Tax
Avoidance Directive (ATAD) and the OECD’s Pillar Two framework in neutralizing
hybrid mismatch arrangements. The research goal is to determine the extent to which
these regimes complement or overlap in mitigating hybrid mismatch outcomes. Final
findings reveal that ATAD applies a direct, transaction-level approach, by
mechanically denying deductions or mandating income inclusion, while Pillar Two
provides an indirect, formula-driven back-stop, levelling the effective tax rates
across jurisdictions through GloBE income adjustments and top-up taxes. Together,
these rules work hand in hand to strongly discourage companies from using hybrid
mismatches tax strategies. The thesis concludes that, although the two regimes are
applied successively, not in parallel, they require clearer sequencing and
consolidated guidance to prevent double taxation, especially in consideration of Art.
3.2.7 of the GloBE Model Rules, reduce compliance burdens, and strengthen the
global tax coherence.}},
  author       = {{Ionescu, Renata-Adelina}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Role of Pillar Two in Neutralizing Hybrid Mismatches: Complementary to or Overlapping with ATAD?}},
  year         = {{2025}},
}