(May 22, 2015)
On May 22, 2015 the OECD published a revised Public Discussion Draft on Action 6 of the BEPS Action Plan (Prevent treaty abuse). The Discussion Draft is titled: “Revised discussion draft BEPS ACTION 6: PREVENT TREATY ABUSE”.
With respect to Action 6 the BEPS Action Plan states a.o.:
“(ii) Restoring the full effects and benefits of international standards
Current rules work well in many cases, but they need to be adapted to prevent BEPS that results from the interactions among more than two countries and to fully account for global value chains. The interposition of third countries in the bilateral framework established by treaty partners has led to the development of schemes such as low-taxed branches of a foreign company, conduit companies, and the artificial shifting of income through transfer pricing arrangements. FDI figures show the magnitude of the use of certain regimes to channel investments and intra-group financing from one country to another through conduit structures. In order to preserve the intended effects of bilateral relationships, the rules must be modified to address the use of multiple layers of legal entities inserted between the residence country and the source country.
Existing domestic and international tax rules should be modified in order to more closely align the allocation of income with the economic activity that generates that income:
Treaty abuse is one of the most important sources of BEPS concerns. The Commentary on Article 1 of the OECD Model Tax Convention already includes a number of examples of provisions that could be used to address treaty-shopping situations as well as other cases of treaty abuse, which may give rise to double non-taxation. Tight treaty anti-abuse clauses coupled with the exercise of taxing rights under domestic laws will contribute to restore source taxation in a number of cases.
ACTION 6
Prevent treaty abuse
Develop model treaty provisions and recommendations regarding the design of domestic rules to prevent the granting of treaty benefits in inappropriate circumstances. Work will also be done to clarify that tax treaties are not intended to be used to generate double non-taxation and to identify the tax policy considerations that, in general, countries should consider before deciding to enter into a tax treaty with another country. The work will be co-ordinated with the work on hybrids.”
As stated the Discussion Draft issued on May 22, 2015 is a revised Discussion Draft. On November 21, 2014 the OECD released an initial Discussion Draft on Action 6 of the BEPS Action Plan. The Comments the OECD received on this Discussion Draft were released on January 12, 2015. Subsequently a public consultation meeting was held on January 22, 2015.
According to the press release that accompanies the release of the revised Discussion Draft, this new discussion draft reflects the conclusions and proposals that resulted from that meeting and on which the Committee on Fiscal affairs is now inviting comments. According to the press release comments should be sent in Word format by e-mail by June 17, 2015 at the latest. The press release furthermore states that NO public consultation meeting will be held regarding the proposals included in the revised Discussion Draft.
Click here to be forwarded to the revised Discussion Draft on Action 6 as published on the website of the OECD, which will open in a new window.
Click here to be forwarded to the Discussion Draft on Action 6, which was released on November 21, 2014, as published on the website of the OECD, which will open in a new window.
Click here to be forwarded to “COMMENTS RECEIVED ON PUBLIC DISCUSSION DRAFT FOLLOW-UP WORK ON BEPS ACTION 6: PREVENT TREATY ABUSE” as published on the website of the OECD on January 12, 2015, which will open in a new window.
If you are interested in reviewing the Videos On Demand that are available of the public consultation meeting that was held on January 22, 2015, you can find links to those in our sub-section BEPS LIBRARY.
Our BEPS Library is without a doubt the most efficient way to locate BEPS (related) documents. The Action Plan, Discussion Drafts, Comments published and more, all of them are just 1 mouse-click away. Are you a professional working in international taxation? Then you should definitely bookmark our BEPS Library to your list of FAVORITES.
Copyright – internationaltaxplaza.info
Stay informed: Subscribe to International Tax Plaza’s Newsletter!
and
Follow International Tax Plaza on Twitter (@IntTaxPlaza)
