Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘hybrid mismatches’

EU Council: New Directive

The EU Council has provided a Directive that would introduce legislation ensuring the EU maintains its leadership role in anti-BEPS recommendations, as well as providing good tax governance for the rest of the world.  EY’s summary of the Directive is provided for reference:

Click to access 2015G_CM6047_EU%20Council%20adopts%20directive%20on%20exchange%20of%20info%20on%20tax%20rulings,%20agrees%20on%20other%20corporate%20tax%20issues.pdf

Key points:

  • Automatic exchange of tax rulings would be effective 1/1/2017.
  • Changes would be introduced for the EU Code of Conduct.
  • EU anti-BEPS proposal to include the following BEPS Actions:
    • 2: Hybrid mismatches
    • 3: CFC rules
    • 4: Interest limitations
    • 6: General anti-abuse rule (noting its inclusion for the Royalty & Interest Directive, similar to the Parent-Subsidiary Directive)
    • 7: PE status
    • 13: Country-by-Country (CbC) reporting
  • Common Corp. Tax Base (absent later consolidation phase) proposal to be introduced in 2016

The EU continues its pace to maintain its global lead in addressing anti-BEPS concerns, which will impact non-EU countries around the world.  Thereby, it provides another set of rules that would be mandated to achieve EU conformity.

 

 

 

G20 Int’l Tax Symposium: BEPS topics

The G20 recently held a symposium including 300 participants from 60 countries.  The G20 tax agenda focused on the current status of BEPS in developed, and developing, countries.  The PwC summary outlines the current state of agreement, and disagreement, with the proposed BEPS Guidelines.

Click to access pwc-g20-international-tax-symposium.pdf

Key observations:

  • Hybrid mismatches will include treaty changes and domestic law recommendations
  • The interest limitation solution is not yet adequate
  • A clear analytical framework should be used to determine application of non-recognition transactions
  • The Amadeus database, macro-data and tax return data was used to measure the spill-over effect of BEPs
  • Not all measures to tackle BEPS will be supported by guidance, although guidance will continue in following years
  • Coordination and consistency of application is vital, although it is challenged by unilateral actions of residence countries
  • Implementation is key, although a single approach no longer works

The observations cited in the PwC summary are insightful, while providing further certainty that BEPS implementation will be diverse with different timelines, while guidance continues in post-2015.

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