Progress continues to be made in the BEPS project, with the release in September 2014 of the "2014 Deliverables" and a raft of discussion drafts published during the autumn. Here is a summary of all the recent developments.
Within the framework of the BEPS (Base Erosion and Profit Shifting) action plan adopted in July 2013, last 16 September, the OECD published its first recommendations in the form of reports on seven of the 15 points of the action plan:
- Address the tax challenges of the digital economy (Action 1). This report is presented as being final; however, the questions related to VAT are the subject of a separate draft report (published in December 2014) and the issues involving the digital economy will be handled within the framework of other actions (notably as regards controlled foreign companies, permanent establishments and transfer pricing).
- Ensure the coherence of corporate income taxation at the international level, through new treaty provisions to neutralise the effects of hybrid mismatch arrangements (Action 2). Work will continue until September 2015 on certain substantive and implementation issues.
- Counter harmful tax practices (Action 5). This is an interim report outlining progress made with the three outputs under this action: (i) finalising the review of member country preferential regimes (in progress), (ii) a strategy to expand participation to non-OECD member countries (deliverable expected in September 2015) and (iii) consideration of revisions or additions to the existing framework (deliverable expected in December 2015).
- Realign tax rules and relevant substance to restore the intended benefits of international standards and to prevent the abuse of tax treaties (Action 6). This draft report may be modified in 2015.
- Assure that transfer pricing outcomes are in line with value creation, through actions to address transfer pricing issues in the key area of intangibles (Action 8). Some sections of the report may be changed and will not be finalised until September 2015 because they are related to other points in the action plan. Within the framework of this action, and of Actions 9 (risks and capital) and 10 (other high-risk transactions), follow-up work was published in December 2014 and should be further published in April 2015.
- Improve transparency for tax administrations and increase certainty and predictability for taxpayers through improved transfer pricing documentation and a template for country-by-country reporting (Action 13). Although the content of transfer pricing documentation requirements is finalised, implementation issues will be the subject of additional work in coming months.
- Facilitate swift implementation of the BEPS actions through a report on the feasibility of developing amultilateral instrument to amend bilateral tax treaties (Action 15). The report confirms the feasibility of a multilateral instrument the implementation of which will be the subject of additional work in 2015.
These initial reports are closely connected to those planned for 2015 insofar as the action plan aims to offer comprehensive, complete solutions. Consequently, the OECD states that the recommendations are in draft form to be able to adapt them based on the potential impact of the 2015 deliverables; they will be finalised subsequently.
In addition to these seven initial deliverables, the following documents were published since October:
- a discussion draft regarding Action 7 (Prevent the artificial avoidance of permanent establishment status) was published on 31 October 2014. Comments must have been sent by 9 January 2015, and public consultation was set to take place on 21 January 2015, for the report planned for September 2015.
- a discussion draft on low value-adding intra-group services was published on 3 November 2014, within the framework of Action 10 (Other high-risk transactions). Comments must be sent by 14 January 2015, and public consultation will take place on 19-20 March 2015, for the report planned for September 2015.
- a discussion draft on follow-up work on the means for preventing the abuse of tax treaties (Action 6) was published on 21 November 2014. Comments must be sent by 9 January 2015, and public consultation will take place on 22 January 2015. This additional work should be the subject of a revised report in 2015.
- a discussion draft on the transfer pricing aspects of cross-border commodity transactions and a discussion draft on the use of profit splits in the context of global value chains were published on 16 December 2014 as part of the work on Action 10 (Other high-risk transactions). Comments must be sent by 6 February 2015, and public consultation will take place on 19-20 March 2015.
- discussion drafts on International VAT/ GST Guidelines within the framework of Action 1 (Digital economy) were published on 18 December 2014. Comments must be sent by 20 February 2015, and public consultation will take place on 25 February 2015.
- discussion draft on interest deductions within the framework of Action 4 was published on 18 December 2014. Comments must be sent by 6 February 2015, and public consultation will take place on 17 February 2015.
- a discussion draft on dispute resolution within the framework of Action 14 was published on 18 December 2014. Comments must be sent by 16 January 2015, and public consultation will take place on 23 January 2015.
- a discussion draft on revisions to Chapter I of the Transfer Pricing Guidelines (Including risk, recharacterisation and special measures) dealing with work in relation to Actions 8-10 was published on 19 December 2014. Comments must be sent by 6 February 2015, and public consultation will take place on 19-20 March 2015.
All the measures proposed to date may be modified in coming months based on the additional work. Once finalised, the adopted measures are expected to become applicable via modifications in domestic legislation and/or bilateral tax treaties, or based on the future multilateral instrument.