impact on 67 13 4 aviation ... · treaty abuse action 6 country by country reporting (cbcr) action...
TRANSCRIPT
Treaty Abuse
Action
6
Background
Action
Impact
Impact onaviation leasingOECD BEPS Project
www.pwc.ie/aviationfinance
Co
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try
by
Co
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try
Rep
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ing
(C
bC
r)
Action
13
Tre
aty
Ab
use
Action
6
Per
ma
nen
t E
sta
bli
shm
ent
(PE
) S
tatu
s
Action
7
Inte
rest
Ded
uct
ion
Action
4
Cli
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ne
xt
Treaty Abuse
Action
6
Background
Action
Impact
Impact onaviation leasingOECD BEPS Project
www.pwc.ie/aviationfinance
Aim to develop model treaty provisions regarding the design of rules to prevent the granting of treaty
benefits in inappropriate circumstances.
Requires a treaty resident tomaintain a minimum substance level
by satisfying additional test(s):
Treaty Abuse
Action
6
*Finalisation of LOB clause pending outcome of US model treaty consultation process
Simplified LoB & PPT
Detailed LoB & anti
conduit rule
Stand alone
principal purpose
test
Limitation* on benefits
clause
• Potential risk of removal of access to treaty benefits for non-owner lessors and low substance owner lessors
• Implementation through multi-lateral instrument – expected December 2016
Arrivals
Final Report: Oct 2015
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by
Co
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try
Rep
ort
ing
(C
bC
r)
Action
13
Per
ma
nen
t E
sta
bli
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(PE
) S
tatu
s
Action
7
Inte
rest
Ded
uct
ion
Action
4
Cli
ck f
or
ne
xt
Treaty Abuse
Action
6
Background
Action
Impact
Impact onaviation leasingOECD BEPS Project
www.pwc.ie/aviationfinance
Tre
aty
Ab
use
Action
6
Co
un
try
by
Co
un
try
Rep
ort
ing
(C
bC
r)
Action
13
Inte
rest
Ded
uct
ion
Action
4
Permanent Establishment (PE) Status
Action
7
Concern that businesses have significant involvement in another jurisdiction without creating a PE. Concern over use of specific
activity exemptions to create PE avoidance structures.
Evolves the definition of a PE to deal with perceived avoidance structures
“Habitually plays the principal
role leading to contract conclusion”
Lowering of threshold
below “habitually concludes contracts”
Narrow the scope of the Independent
agent rule
• Increased risk of triggering PEs in multiple jurisdictions where more than preparatory/auxiliary functions are undertaken
• Increased subjectivity and uncertainty/tax disputes
• Guidance required on profit attribution to “new” PEs - expected late 2016
Arrivals
Final Report: Oct 2015
Cli
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Treaty Abuse
Action
6
Background
Action
Impact
Impact onaviation leasingOECD BEPS Project
www.pwc.ie/aviationfinance
Tre
aty
Ab
use
Action
6
Country by Country Reporting (CbCr)
Action
13
Inte
rest
Ded
uct
ion
Action
4
Per
ma
nen
t E
sta
bli
shm
ent
(PE
) S
tatu
s
Action
7
Desire to enhance transparency for tax administrations and provide information on groups global operations and value chain
The new guidance introduces a three tiered approach
Master File
Local File
CbCr
Arrivals
Final Report: Oct 2015
• Increased TP documentation and reporting requirements
• Need to identify gaps in current TP policies, gather and analyse additional content
• IT and financial systems limitations
Cli
ck f
or
ne
xt
Treaty Abuse
Action
6
Background
Action
Impact
Impact onaviation leasingOECD BEPS Project
www.pwc.ie/aviationfinance
Co
un
try
by
Co
un
try
Rep
ort
ing
(C
bC
r)
Action
13
Tre
aty
Ab
use
Action
6
Per
ma
nen
t E
sta
bli
shm
ent
(PE
) S
tatu
s
Action
7
Interest Deduction
Action
4
Arrivals
Final Report: Oct 2015
• Implementation via domestic law not via treaty
• Implementation not mandatory - will countries deem their existing rules sufficient?
• Further work on group wide rule will continue into 2016
Interest/EBITDA ratio approach suggested to counteract perceived abuse of interest deductions to create BEPS
Potential restriction of interest deduction where certain group tests are not met. Considerations include:
Fixed ratio/ group wide tests/
combinationUnutilised
interest carry forward/back - availability will influence ratio
selected
Range of ratios from 10%-30% suggested
Cli
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Treaty Abuse
Action
6
Co
un
try
by
Co
un
try
Rep
ort
ing
(C
bC
r)
Action
13
Tre
aty
Ab
use
Action
6
Per
ma
nen
t E
sta
bli
shm
ent
(PE
) S
tatu
s
Action
7
Inte
rest
Ded
uct
ion
Action
4
Background
Action
Impact
Impact onaviation leasingOECD BEPS Project
www.pwc.ie/aviationfinance
www.pwc.ie/aviationfinance© 2015 PricewaterhouseCoopers. All rights reserved. PwC refers to the PwC network
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