The main purpose of the paper is analytical research of taxation of hybrid instruments in context of the EU parent-subsidiary directive. Efforts to harmonize taxation inside EU created negative side effects, which were unforeseen. The taxation of hybrid instruments became of the great importance as it created possibilities for development of schemes inside cross-border groups, which are somewhere in between of tax avoidance and tax evasion. This situation was recognized and the EU parent-subsidiary directive was amended in the year 2014. Member states are required to transpose amendments to national law by the end of the year 2015. Possible problems of implementation of amendments are presented on the example of Lithuania. Lithuanian local GAAP were too simplified in case of hybrid instruments and ways of adopting the Lithuanian legal system to the requirements of the amended EU directive are highly uncertain.
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