OECD: Action 2 – Branch mismatches
OECD has published, pursuant to OECD BEPS Action 2, its framework entitled “Neutralising the Effects of Branch Mismatch Arrangements.” A link to the report is provided for reference.
The report includes five types of branch mismatch arrangements:
- Disregarded branch structures where the branch is not a Permanent Establishment (PE)
- Diverted branch payments
- Deemed branch/notional payments
- Branch payments leading to a double deduction (DD)
- Imported branch mismatches
Recommendations to domestic law are included to prevent perceived abuses for the five types of mismatch arrangements. Numerous examples are also provided in the document to illustrate the branch arrangements and recommendations thereto.
This document is required reading for all international tax practitioners, as tax administrations will be seriously considering the recommendations and may decide to try to enforce such rules prior to official legislative actions.