(April 4, 2015) 

On April 3, 2015 the OECD surprised us not with Easter eggs, but with the publication of an other Public Discussion Draft. On April 3, 2015 the OECD published a Public Discussion Draft on Action 3 of the BEPS Action Plan (Strengthen CFC rules). The Discussion Draft is titled: “Public Discussion Draft - BEPS ACTION 3: STRENGTHENING CFC RULES”.

In this respect the BEPS Action Plan states:

"One area in which the OECD has not done significant work in the past is CFC rules. One of the sources of BEPS concerns is the possibility of creating affiliated non-resident taxpayers and routing income of a resident enterprise through the non-resident affiliate. CFC and other anti-deferral rules have been introduced in many countries to address this issue. However, the CFC rules of many countries do not always counter BEPS in a comprehensive manner. While CFC rules in principle lead to inclusions in the residence country of the ultimate parent, they also have positive spillover effects in source countries because taxpayers have no (or much less of an) incentive to shift profits into a third, low-tax jurisdiction.

Action 3

Strengthen CFC rules

Develop recommendations regarding the design of controlled foreign company rules. This work will be co-ordinated with other work as necessary."

According to a press release issued by the OECD in this respect, the discussion draft considers all the constituent elements of CFC rules and breaks them down into the “building blocks” that are necessary for effective CFC rules. The majority of these building blocks include recommendations, and the building block that does not yet include a recommendation discusses possible options that could be included in effective CFC rules.

The building blocks include:

• Definition of a CFC

• Threshold requirements

• Definition of control

• Definition of CFC income

• Rules for computing income

• Rules for attributing income

• Rules to prevent or eliminate double taxation

The press release furthermore states that the discussion draft also identifies specific questions where input is required in order to advance the work on CFC rules.

Comments should be submitted to the OECD by email by May 1, 2015 at the latest.

The OECD also announced that a public consultation meeting on Action 3 will be held in Paris at the OECD Conference Centre on May 12, 2015.

Click here to be forwarded to the Discussion Draft on Action 3 as published on the website of the OECD, which will open in a new window.

For further information click here to be forwarded to a press release as issued by the OECD in this respect.

Click here to be forwarded to the webpage of the OECD where one can register for the public consultation meeting regarding BEPS Action 3 to be held on May 12, 2015.

Interested in efficiently finding more BEPS related information? Then click here to be forwarded to our BEPS LIBRARY where you can very efficiently find more BEPS related information.

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