The OECD released a discussion draft on Aug 22 addressing branch mismatch structures, following up its action under BEPS Action 2 re: hybrid mismatch arrangements. In summary, the draft provides rules that neutralize different legal prescriptions between the branch and head office countries. It is made clear that taxation at a higher tier structure is not a mismatch, and a secondary rule is also addressed that would address this mismatch at the head office country.
Interested parties should respond with their comments by Sept. 19th.
The EY Global Tax Alert and OECD draft links are provided for reference.
Based on this clear intent, it is imperative for all MNE’s to review all branch structures for current mismatch arrangements to asses the potential impact and future actions, as applicable.