On 10 December 2019, the German Ministry of Finance issued a draft bill to implement the anti-tax avoidance directive (ATAD) including Hybrid mismatch rules.
The hybrid mismatch rules will apply from 1 January 2020 to address double deduction and deduction non-inclusion mismatch outcomes between related parties, a legal person and its permanent establishment, between two permanent establishments of the same entity, or in the framework of an organized arrangement and certain other cases.
In general, a hybrid mismatch is addressed by either denying a deduction (taxing a deductible expense) or requiring the inclusion of income. In the event of subsequent dual inclusion of income, a credit will be provided, with a refund for overpaid tax.
