Final BEPS Reports Issued by OECD

MEDIA ROOM

The OECD published 13 final reports along with an explanatory statement under its base erosion and profit shifting (BEPS) project on the 5th October 2015. This was endorsed three days later on the 8th October 2015 by the G20 Finance Ministers’ meeting in Peru’.

The BEPS project outlines 15 action points aimed at tackling the increasing international concern at multinational enterprises avoiding taxes. The 13 reports were issued as a result of a 2-year project that began with the Action Plan on BEPS, endorsed by the G20 leaders in 2013, with the participation of over 60 countries that agreed over a comprehensive set of measures related to significant changes in taxation regimes around the world.

Four ‘minimum standards’

In order to prevent a negative impact on competitiveness that may result from inaction by individual countries, participating countries agreed on four ‘minimum standards’:

  • Country-by-country reporting – to provide tax administrations with a global picture of the operations of multinationals;
  • Treaty shopping – to put an end to the use of conduit companies to channel investments;
  • Curbing harmful tax practices – in particular in the area of intellectual property and through the automatic exchange of information on tax rulings; and
  • Effective mutual agreement procedures – to ensure that the fight against double non-taxation does not result in double taxation.

Numerous recommendations call for changes to national legislation while other recommendations require changes to double taxation treaties (DTAs). The OECD is taking care of the coordination of negotiations among over 90 countries in order to develop a multilateral instrument capable of incorporating tax-treaty related BEPS measures into the present network of bilateral treaties.  Interested countries should be able to sign their interest in this instrument in 2016.

Transfer pricing rules

Guidance with regards to applying transfer pricing rules will be updated while the OECD is also encouraging governments to strengthen rules covering Controlled Foreign Companies (CFCs), interest deductibility and hybrid mismatch arrangements to enable double non-taxation.

In November 2015, the final OECD report is due to be presented to G20 leaders and the BEPS project will then move on to its implementation stage.