BEPS Action 6 (Treaty Abuse), as revised
OECD’s latest draft on Action 6 of the BEPS Action Plan (Prevent Treaty Abuse) addresses previous questions raised and comments received, in addition to some new proposals. Part I of the draft presents the alternative “Simplified” Limitation on Benefits (LOB) Rule, while Part II outlines the previous 20 questions for follow-up work, including changes to domestic law made after the conclusion of a treaty.
Succinct comments are to be submitted by 17 June 2015. A link to the draft is provided:
Click to access revised-discussion-draft-beps-action-6-prevent-treaty-abuse.pdf
The discussion draft is very comprehensive and principle based, including additional examples from its previous draft.
However, it is worth noting that the OECD would not require an approval process for application of the subjective principal purposes test (PPT) (i.e. the state may “wish” to apply such process) and that the PPT would be included in the arbitration mechanism of paragraph 5 of Article 25, although this issue should also be discussed as part of the work on Action 14 (Make dispute resolution mechanisms more effective). This latter point would seem to be area for additional confirmation in providing comments to avoid double taxation on issues that are inherently subjective.
The draft will provide important precedent in obtaining treaty relief in a post-BEPS era, thus the proposals should be reviewed in detail, with consideration to provide succinct comments.