OECD & BEPS

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En provenance du cours de Universiteit Leiden

Rethinking International Tax Law

523 notes

Universiteit Leiden

Rethinking International Tax Law

523 notes

In recent years, the international tax planning strategies of multinationals have become a source of – often heated – debate. This course provides learners with the tools to become fully informed participants in the debate by explaining the foundations and practice of international tax law as well as addressing current developments and the ethical aspects of tax planning.

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Principles of international taxation & tax treaties

In this third module, we will continue to analyze our tax planning base case. To that end, in module 2, we studied the typical design of corporate tax law systems. In this module, we will look at international aspects of corporate tax law systems (CFC, qualification mismatches). We will also get to the core of international tax law and study double tax treaties.

OECD & BEPS5:26

Rencontrer les enseignants

Prof. Dr. Sjoerd Douma
Faculty of Law
International Tax Center

Hi, and welcome to video six of module three, the final video for

our basic trek of this module.

Throughout this module I've noticed that aggressive tax planning,

which only relativity recently grabbed the public's attention,

has long been a subject for discussion among experts.

Importantly in this respect, significant work as been done by the OECD.

Most recently, the OECD started the base erosion and profit shifting BEPS project.

Under which it is making a push to update international tax notions to address,

and I quote, tax burning strategies that exploit gaps and

mismatches in text rules to make profits disappear for tax purposes or to shift

profits to locations where there is little or no real activity, but the taxes are low

resulting in little or no overall corporate tax being paid, end of quote.

You will note that these are the exact

tax spending structures that we are reviewing as part of this course.

The work of the OECD on BEPS took flight when the G20 finance

ministers meeting in Los Cabos, Mexico in June 2012 express support for

the work that OECD had been doing on exchange of information.

On February 12th, 2013 the OECD released a report addressing base erosion and

Profit Sharing, identifying six key areas of concern with respect to BEPS.

First, mismatches in entity and instrument characterization.

Second, taxing profits from the delivery of digital goods and services.

Third, intra-group debt financing and captive insurance.

Fourth, transfer pricing.

Fifth, anti-avoidance measures.

And sixth, harmful preferential regimes.

Following up on that report on July 19, 2013,

the OECD released an action plan breaking down the key areas into

15 action points based on three core principles, gaps or mismatches,

frictions, and transparency, and two general additional work areas.

Since that time, the OECD has been working tirelessly publishing additional reports,

requesting public and expert feedback, etcetera, to meet its self-imposed

deadline of completing the work on the action items in December 2015.

Notably, the following changes are under consideration in

relation to the items which we discussed during this and the previous module.

In respect of hybrid mismatches, changes to domestic rules to address hybrid

mismatches, in particular the enactment of linking rules that would relate

tax treatment of a payment with respect to a specific hybrid entity or instrument In

one country to the tax treatment of such payment prompted in the other country, and

changes to the OECD model treaty to be incorporated in treaties,

provide to insure that hybrid entities and

instruments do not benefit from treaty provisions from union.

Regarding controlled foreign company rules, here it is suggested to develop

recommendations regarding the design of controlled foreign company rules,

in particular in situations of hybrid mismatch arrangements.

On interest deductibility, here, we see proposals to introduce new

international approaches to limiting deductions for interest expense,

based on a group wide rule, a limitation on a country's net deductible interest

with respect to the group's net third-party interest expense.

Or a fixed ratio rule, a limitation on a company's deductible interest with

reference to an amount determined by applying a fixed benchmark ratio to

an entity's earnings, assets or equity, or combinations of these two approaches.

Harmful tax practices.

Here it is suggested to improve exchange of information between tax authorities

in particular in relation to rulings and to introduce appropriate substantial

activity requirements in preferential tax regimes.

Prevention of treaty abuse.

Here, the OECD suggests to include a minimum standard for claiming tax treaty

benefits in the OECD mobile tax convention by a combination of specific anti-abuse

rules, for example a so called limitation on benefits clause, and general anti-abuse

rules in order to prevent treaty abuse and in particular, treaty shopping.

Regarding the artificial avoidance of the permanent establishment definition.

Here, the OECD proposes to address artificial

avoidance of the permanent establishment by adjusting the existing OECD model text

to meet the definition of what constitutes a permanent establishment, in particular,

in relation to so called commissionaire structures.

We will provide you with a further update on the BEPS project in relation to

transfer pricing during the next module which is hosted by an expert in

the field and the director of the Transfer Pricing Research Center, Leiden.

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