Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘Action 14’

OECD / BEPS update

EY’s Global Tax Alert provides a succinct summary of the latest OECD and BEPS developments, including:

  • G20 and exchange of information upon request standard
  • Multilateral instrument, 68 countries moving forward
  • Peer reviews on BEPS 4 minimum standards:
    • Action 5, harmful tax practices
    • Action 6, treaty abuse
    • Action 13, country-by-country reporting (CbCR)
    • Action 14, dispute resolution
  • Action 5 peer reviews of preferential tax regimes
  • Action 13, CbCR exchange relationships; important for US MNE’s and similar jurisdictions without obligatory 2016 reporting
  • MAP peer reviews
  • Discussion drafts on profit splits and attribution of profits re: PE’s; comment period to Sept. 15, 2017
  • Branch mismatch forthcoming revisions
  • Common reporting standard
  • Digital taxation

OECD is still very busy, with a plethora of BEPS follow-up and other activities, although there seems to be continuing flexibility to gain collaboration that will also lead to added complexity and disputes.

http://www.ey.com/Publication/vwLUAssets/OECD_shares_updates_on_tax_activities_in_26_June_2017_Tax_Talk_webcast/$FILE/2017G_04094-171Gbl_OECD%20provides%20updates%20on%20tax%20activities%20in%20Tax%20Talk%20webcast.pdf

Multilateral Convention of the OECD; Prime time

After a long waiting period, with many discussions as to its predicted content, the OECD’s Multilateral Convention pursuant to BEPS Action 15 is ready for prime time.  Links to EY’s Global Tax Alert, and OECD’s Explanatory Statement and Multilateral Convention are provided for reference.

The Multilateral Convention is very flexible as to what a country wants, or does not want, within its treaty related provisions to signify its alliance with BEPS Actions.

EY’s Global Tax Alert states: “The tax treaty related BEPS measures covered by the multilateral instrument include (elements of): (i) Action 2 on hybrid mismatch arrangements, (ii) Action 6 on treaty abuse, (iii) Action 7 on the artificial avoidance of the PE status; and (iv) Action 14 on dispute resolution. The substance of the tax treaty provisions relating to these actions was agreed under the final BEPS package released in October 2015. The multilateral instrument does not modify or add to the substance of these provisions. The instrument is solely focused on how to modify the provisions in bilateral or regional tax treaties in order to align these treaties with the BEPS measures.”

Due to the flexibility of the new Convention, this unilateral based process poses many questions as to the consistency of intent for the related BEPS Actions around the world.  It is certain that, in the short term, there will be considerable complexity and varying interpretations of what the Convention means.  Accordingly, the Explanatory Statement and Multilateral Convention are to be reviewed carefully to understand short and long-term trends in this new era of international tax.

http://www.ey.com/Publication/vwLUAssets/OECD_releases_multilateral_instrument_to_modify_bilateral_tax_treaties_under_BEPS_Action_15/$FILE/2016G_04025-161Gbl_OECD%20releases%20MI%20to%20modify%20bilateral%20tax%20treaties%20under%20BEPS%20Action%2015.pdf

http://www.oecd.org/tax/treaties/explanatory-statement-multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-BEPS.pdf

http://www.oecd.org/tax/treaties/multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-BEPS.pdf:

OECD’s Multilateral Instrument: TEI comments

Tax Executives Institute, Inc. (TEI) has recently submitted comments in response to OECD’s public discussion draft on Action 15 re: technical issues for the upcoming Multilateral Instrument.

A link to TEI’s excellent comments are provided for reference:

http://www.tei.org/Documents/TEI-Comments-BEPS-Action-15-Tax-Treaty-Related-Measures-June-29-2016.pdf

Highlights:

  • Mandatory binding arbitration was not included, thus the increase in MAP cases seem inevitable.
  • A “baseball” type of arbitration is recommended.
  • All MAP cases should be eligible for arbitration.
  • All signatories should adopt the Action 14 minimum standard.
  • Countries should have the ability to choose what treaty-related BEPS measures it will adopt.
  • Countries should have the ability to choose what treaty partners and relevant tax treaties would apply for various BEPS provisions.
  • The modified provisions are only effective upon official ratification.
  • A new peer process should be adopted for treaty interpretation.

The multilateral instrument is key to the consistent application of BEPS Actions, and the well-written TEI comments are highly recommended for all interested parties.

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