Engagement of developing countries in the international tax agenda, including on BEPS, is imperative, in particular to ensure they receive appropriate support to address the specific implementation challenges they face. The input received from developing countries has been fed directly into the development of the BEPS Action Plan.
The OECD Committee on Fiscal Affairs (CFA), bringing together 44 countries on an equal footing (all OECD members, OECD accession countries, and G20 countries), has adopted a final set of deliverables described in the Action Plan.
This report sets out recommendations for domestic rules to neutralise the effect of hybrid mismatch arrangements and includes changes to the OECD Model Tax Convention to address such arrangements. Once translated into domestic law, the recommendations in Part 1 of the report will neutralise the effect of cross-border hybrid mismatch arrangements that produce multiple deductions for a single expense or a deduction in one jurisdiction with no corresponding taxation in the other jurisdiction. Part 1 of the report will be supplemented by a commentary, which will explain the recommended rules and illustrate their application with practical examples. Part 2 of the report sets out proposed changes to the Model Convention that will ensure the benefits of tax treaties are only granted to hybrid entities (including dual resident entities) in appropriate cases. Part 2 also considers the interaction between the OECD Model Convention and the domestic law recommendations in Part 1.
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Revised draft agenda for the public consultation on Action Item 2
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Comments on Action item 2 - Hybrid Mismatch Arrangements
OECD publishes comments received on Action 2 discussions drafts (Neutralise the Effects of Hybrid Mismatch Arrangements)
Over 330 senior tax officials from more than 110 jurisdictions and international organisations met in Paris on 26-28 March 2014 during the 3rd Annual Meeting of the Global Forum on Transfer Pricing.
Public comments are invited on discussion drafts that include the proposals produced with respect to Action 2 (Hybrid Mismatch Arrangements) of the BEPS Action Plan.
National tax laws have not kept pace with the globalisation of corporations and the digital economy, leaving gaps that can be exploited by multi-national corporations to artificially reduce their taxes.
While after-tax hedging is not, of itself, aggressive - being generally a straightforward risk management technique - the report recognises that it can also be used as a feature of aggressive tax planning (ATP) schemes. ATP schemes based on after-tax hedging pose a threat to countries’ revenue base.