Today, the Organization for Economic Cooperation and Development (OECD) released 13 final reports under its Base Erosion and Profit Shifting (BEPS) project. The reports, which cover all 15 actions of the BEPS action plan, were undertaken at the request of the G-20 leaders. OECD Secretary-General Angel Gurría stated in a press release that “[t]he measures we are presenting today represent the most fundamental changes to international tax rules in almost a century: they will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective.” The OECD will present its final package of BEPS measures to the G-20 finance ministers on October 8. On November 15-16, the BEPS measures will be delivered to the G-20 leaders for final approval during their annual summit.
As outlined in the Explanatory Statement, some of the final reports’ key measures include: setting minimum standards on country-by-country reporting, treaty shopping, curbing harmful tax practices and improving dispute resolution; revising the guidance on the application of transfer pricing rules to prevent taxpayers from using “cash box” entities to shelter profits in low- or no-tax jurisdictions; redefining the concept of permanent establishment; and offering governments a series of new measures to be implemented through domestic law changes.
Some of the measures outlined in the final reports involve changes to the OECD Model Tax Convention, Commentary to the OECD Model, and/or OECD Transfer Pricing Guidelines. Other recommended measures generally will need to be implemented through domestic law changes, including measures pertaining to controlled foreign corporations, interest deductibility, and hybrid arrangements. According to the Information Brief, “[w]ork will be carried out to support interested countries, particularly those for which capacity building is an important issue, in implementing the rules and applying them in a consistent manner.” In addition, the OECD will continue work to develop to a multilateral instrument to implement the treaty-related BEPS measures into the existing network of bilateral tax treaties.
Links to each of the reports are provided below:
- “Addressing the Tax Challenges of the Digital Economy” (Action 1)
- “Neutralising the Effects of Hybrid Mismatch Arrangements” (Action 2)
- “Designing Effective Controlled Foreign Company Rules” (Action 3)
- “Limiting Base Erosion Involving Interest Deductions and Other Financial Payments” (Action 4)
- “Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance” (Action 5)
- “Preventing the Granting of Treaty Benefits in Inappropriate Circumstances” (Action 6)
- “Preventing the Artificial Avoidance of Permanent Establishment Status” (Action 7)
- “Aligning Transfer Pricing Outcomes With Value Creation” (Actions 8-10)
- "Measuring and Monitoring BEPS" (Action 11)
- "Mandatory Disclosure Rules" (Action 12)
- “Guidance on Transfer Pricing Documentation and Country-by-Country Reporting” (Action 13)
- "Making Dispute Resolution Mechanisms More Effective" (Action 14)
- “Developing a Multilateral Instrument to Modify Bilateral Tax Treaties” (Action 15)