The purpose of the first set of rules is to neutralize the effects of:
- Payments under a hybrid financial instrument that gives rise to a deduction/non-inclusion mismatch, including rules for D/NIs arising from a hybrid transfer of a financial instrument and from a substitute payment in respect of a financial instrument.
- Dividends received from a foreign affiliate in respect of which a deduction is available for foreign income tax purposes.
The rules are in line with the OECD recommendations for Action 2 of the BEPS project. Other rules are expected to be introduced at a later date to address other forms of hybrid mismatches.