Page 40 - UUBO Deal Academy 2020 - Materials

Concerns for PE Funds:

Action 2 - Hybrids

▪ The introduction of rules that counter the use of hybrid instruments and entities
that provide tax advantages for MNEs and PE structures

▪ Hybrid Mismatch v. Branch Mismatch
▪ OECD makes recommendations for domestic rules designed to neutralize

mismatches in tax outcomes that arise in respect of payments under a hybrid
mismatch arrangement

▪ Some jurisdictions have adopted the OECD rules into their domestic laws in line
with Action 2

• UK, Australia, NZ - hybrid mismatch rules
• EU members – ATAD 2

• US – Tax Cuts and Jobs Act
• Mauritius – partial exemption rule

▪ PE Managers should evaluate hybrid arrangements critically to mitigate the risk
of tax leakages within their fund structures

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