OECD Base Erosion and Profit Shifting (BEPS)

The Base Erosion and Profit Shifting (BEPS) project of the Organisation for Economic Cooperation & Development (OECD) focuses on countering tax evasion by multinationals. Following the OECD example, the European Commission has also made this theme one of its priority issues, including a European Common Consolidated Corporate Tax Base (CCCTB).

The proposals made by these institutions at this time can have an effect on frameworks for international tax legislation and the transfer pricing standards. Therefore, these developments are also important for the internationally operating Small & Medium Sized Enterprises (SMEs) and family businesses.

The 15 action items of the OECD in the BEPS project are:

1. The challenges of the digital economy
2. Neutralising the effects of the hybrid mismatch arrangements (e.g., hybrid financing)
3. Reinforcing the Controlled Foreign Company (CFC) regulations
4. Limiting tax deduction for interest to counter excess financing with borrowed capital
5. Countering harmful tax practices, while taking transparency and substance into account
6. Countering the abuse under tax treaties
7. Preventing the artificial avoidance of permanent establishment (PE) status in another country
8. Assuring that transfer pricing is in line with value creation, which concerns mainly the intangibles such as intangible fixed assets and intellectual property
9. Assuring that transfer pricing within a concern is in line with the capital and the exposure to risk
10. Assuring that transfer pricing within a concern is in line with the value creation in transactions with a high risk
11. Developing methods for collecting and analysing data
12. Drafting regulations to have entities liable to tax publish their ‘aggressive tax planning’
13. Re-examining the current transfer pricing documentation in which the justification of transfer pricing occurs
14. Making the ‘dispute resolution’ mechanisms in tax treaties more effective
15. Developing a multilateral instrument or treaty in which several countries are parties simultaneously

Do you want to know what the initiatives of the OECD and European Commission can mean for you and your enterprise? Contact one of the accon■avm specialists in international tax advice via international@acconavm.nl.