Base erosion and profit shifting

Release of a discussion draft on Action 4 (Interest deductions and other financial payments)


18/12/2014 - Public comments are invited on a discussion draft which deals with action 4 (Interest deductions and other financial payments) of the BEPS Action Plan.


In July 2013, the Action Plan on Base Erosion and Profit Shifting directed the OECD to commence work on 15 actions designed to ensure the coherence of corporate income taxation at the international level. The first seven of these actions were presented to G20 Leaders at the Brisbane Summit in November 2014.


Action 4 of the BEPS Action Plan focusses on best practices in the design of rules to prevent base erosion and profit shifting using interest and other financial payments economically equivalent to interest:



Limit base erosion via interest payments and other financial payments

Develop recommendations regarding best practices in the design of rules to prevent base erosion through the use of interest expense, for example through the use of related-party and third-party debt to achieve excessive interest deductions or to finance the production of exempt or deferred income, and other financial payments that are economically equivalent to interest payments. The work will evaluate the effectiveness of different types of limitations. In connection with and in support of the foregoing work, transfer pricing guidance will also be developed regarding the pricing of related party financial transactions, including financial and performance guarantees, derivatives (including internal derivatives used in intra-bank dealings), and captive and other insurance arrangements. The work will be co-ordinated with the work on hybrids and CFC rules.


This discussion draft stresses the need to address base erosion and profit shifting using deductible payments such as interest that can give rise to double non-taxation in both inbound and outbound investment scenarios. It examines existing approaches to tackling these issues and sets out different options for approaches that may be included in a best practice recommendation. The discussion draft also identifies specific questions where input is required in order to advance this work. The options included in this discussion draft do not represent the consensus view of the Committee on Fiscal Affairs (CFA) or its subsidiary bodies, but are intended to provide stakeholders with substantive options for analysis and comment.


The Action Plan calls for this work to be completed by September 2015. As part of the transparent and inclusive consultation process mandated by the Action Plan, the CFA invites interested parties to send comments on this discussion draft


Comments should be submitted by 6 February 2015 at the latest (no extension will be granted) by email to [email protected] in Word format (in order to facilitate their distribution to government officials). They should be addressed to Achim Pross, Head, International Co-operation and Tax Administration Division, OECD/CTPA.


Please note that all comments received regarding this consultation draft will be made publicly available. Comments submitted in the name of a collective “grouping” or “coalition”, or by any person submitting comments on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective grouping or coalition, or the person(s) on whose behalf the commentator(s) are acting.


Public Consultation

A public consultation meeting on Action 4 will be held in Paris at the OECD Conference Centre on 17 February 2015. Details of how to submit comments on the discussion draft and attend the public consultation meeting are available on line: