OECD Tax Talks CENTRE FOR TAX POLICY AND ADMINISTRATION

12 July 2016

2:00pm – 3:00pm (CEST)

Ask questions and comment throughout the webcast

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Join the discussion

Via email CTP.Contact@oecd.org

Via Twitter using #OECDTaxTalks

Update on:

• The BEPS Project

• G20 Tax Symposium

• Tax Transparency

• … and what’s next

Presented by:

• Pascal Saint-Amans, Director, Centre for Tax Policy and Administration

• Mayra Lucas, Advisor, Transfer Pricing Unit

• Melinda Brown, Advisor, Transfer Pricing Unit

• Achim Pross, Head of International Co-operation and Tax Administration

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Today’s topics and speakers

The Inclusive Framework on BEPS

Discussion drafts on transfer pricing, profit attribution

and interest deductibility

Latest CBCR guidance

Publication of schema for exchange of tax rulings

Negotiations of the Multilateral Legal Instrument

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BEPS

• First meeting of the Inclusive Framework

– Opening the OECD’s Committee on Fiscal Affairs to committed countries and jurisdictions on BEPS issues

– 84 members

• All OECD and G20 economies

• 38 new members, including over a dozen African countries.

– 21 countries and jurisdictions participated as BEPS Invitees, including Jamaica, Malaysia, Mauritius, Panama, and the United Arab Emirates

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OECD/G20 Inclusive Framework

on BEPS Implementation

• Key outcomes of the meeting

– Steering Group established

– Mandates for peer review of the 4 minimum standards and monitoring implementation of the BEPS measures

– Approval of discussion drafts

Also, 5 more countries (Argentina, Curaçao, Georgia, Korea, Uruguay) signed the Multilateral Competent Authority Agreement for the automatic exchange of CbC reports— 44 signatories in total

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Inclusive Framework

1. Conforming Changes to Chapter IX of the Transfer Pricing

Guidelines (Actions 8-10)

• Invitation for public review published on 4 July 2016

• Review aimed only at identifying real or perceived inconsistencies

with revised TPG and duplications (i.e. not a re-opening of any

substantive issues)

• Deadline for comments: 16 August 2016

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New BEPS discussion drafts

2. Attribution of profits to PEs (Action 7)

3. Revised guidance on profit split method (Actions 8-10)

• Released: 4 July 2016

• Deadline: 5 September 2016

• Public consultation: 11-12 October 2016

4. Interest deductibility (Action 4)

• Released: 11 July 2016

• Deadline: 16 August 2016

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New BEPS discussion drafts

• Work mandated by report on BEPS Action 7

• Illustrate the attribution of profits to PEs

considering the outcomes under BEPS Action 7

and BEPS Actions 8-10

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Discussion draft: Attribution of profits to PEs

• Examples on how to attribute profits to:

– Dependent agent PEs

– Fixed PEs to which the Article 5(4) exemptions do

not apply

• Possible economic double taxation if Art. 7 and

Art. 9 are not applied coherently

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Discussion draft: Attribution of profits to PEs

• Most appropriate method should be applied

- No intention to expand or narrow scope of PS

• Two ways to split profits, with different risk outcomes. Transactional profit splits of:

- actual profits

- anticipated profits

• When is PS likely to be the most appropriate method?

- Unique and valuable contributions

- Highly integrated operations

- sharing of economically significant risks?

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Discussion draft:

Transactional profit split method

Ongoing transfer pricing work

Hard to Value Intangibles

• Implementation: focus on when and how the HTVI approach

should apply

Low Value-adding Intra-group Services

• Country positions to be announced

Transfer pricing aspects of financial transactions

• Scope is currently being defined

• Economically relevant characteristics for determining arm’s length

conditions for financial transactions

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Discussion draft: Interest deductibility

• Action 4 Report mandated further detailed work on key

elements to assist countries in implementing the rule

• The discussion draft does not propose changes to

anything agreed in the Report

• Group ratio rule allows entities to deduct interest up to

the net interest/EBITDA ratio of worldwide group

Discussion draft: Interest deductibility

1. Calculation of

net third party

interest expense

2. Calculation

of group-

EBITDA

3. Dealing with

the impact of

losses

Discussion draft recommends a

consistent approach based on a

group’s consolidated financial

statements

Some flexibility for countries to take

into account domestic tax law or

policy

Sets out

alternative

approaches to

balance the needs

of groups and

countries

• OECD guidance released on:

– Transitional filing options for MNEs

(“Parent surrogate filing”)

– Application of CbC reporting to investment funds

– Application of CbC reporting to partnerships

– Impact of currency fluctuations on the agreed

EUR 750 million filing threshold

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Update: Country-by-Country Reporting

• Released standardised IT-format for the exchange on

tax rulings (ETR) between jurisdictions:

– ETR XML Schema, and

– related User Guide

• Help to ensure the swift and efficient implementation of

the BEPS measures

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Tax rulings exchange XML Schema

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Tax Rulings Compulsory Spontaneous

Exchange

1. Rulings related to preferential

regimes

2. Unilateral APAs and other TP rulings

3. Rulings given a unilateral downward

adjustment

4. Permanent establishment (PE)

rulings

5. Related party conduit rulings

6. Other rulings subsequently agreed

to give rise to BEPS concerns

1. Countries of residence of related

parties with a transaction covered

by the ruling, or in the case of PE

ruling country of head office/PE as

case may be

2. Country of Immediate Parent Co

3. Country of Ultimate Parent Co

Categories of rulings To be exchanged with

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Country B Country A

Country A

Competent Authority Country B

Competent

Authority

Agreement to exchange

information e.g. MAC, DTC

Tax

administration

rulings division

2. Prepares summary in

agreed template including

taxpayer details, related party

details in country B and

summary of issues covered by

ruling

1. Issues ruling to taxpayer

3. Provides information to CA

4. Receives information

and follows confidentiality

safeguards per EOI

agreement; disseminates to

authorised personnel

Tax

administration

risk

assessment

division

5. Reviews information

for risk assessment and

possible compliance

action

XML Schema developed

Tax rulings exchange process

• Discussion draft and public consultation on 7 July

– 33 written comments received

– Diverse group of participants from NGOs and business community

– Focus of input:

• relationship between MLI and existing treaties,

• ensuring consistent application and interpretation

• development of a mandatory binding MAP arbitration provision

• 4th inter-governmental negotiation to take place in September.

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Multilateral Legal Instrument

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G20 Tax Policy

Symposium

• 23 July 2016 in Chengdu, China

• Ministerial-level

• Two key tax policy topics: – Tax policy for innovation-driven and inclusive

growth

– Increasing tax certainty to promote trade and investment in a world where value creation is changing

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G20 Tax Policy Symposium

TAX TRANSPARENCY

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Objective Criteria to identify non-cooperative jurisdictions

Publication of CRS Status Message XML Schema

Three criteria, with benchmarks

1. Implementation of the Exchange of Information on Request Standard (EOIR): at least a

“largely compliant” rating

2. Implementation of the Automatic Exchange of Financial Account Information Standard

(AEOI): committed to implement CRS and begin exchanges by 2018 at the latest.

3. Exchange network: Participation in the Multilateral Convention on Mutual Administrative

Assistance in Tax Matters or a sufficiently broad exchange network that provides for EOIR and

AEOI.

Cooperative: meet the benchmarks of at least 2 criteria.

Immediately non-cooperative: “Non-compliant” jurisdictions or those jurisdictions that are or were

blocked in Phase 1 and have not yet received a rating.

Who will it apply to: all countries and jurisdictions, except developing countries which do not have

financial centres

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Objective Criteria to identify

non-cooperative jurisdictions

• Released standardised IT-format for providing structured feedback

on exchanged Common Reporting Standard information

– The CRS Status Message XML Schema

– The related User Guide

• First exchanges under the Common Reporting Standard scheduled

for September 2017

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Publication of Schema for feedback on

CRS information

WHAT’S NEXT?

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• G20 Finance Ministers meeting in July and Leaders

Summit in September

• Upcoming discussion drafts & public consultations

• Next OECD Tax Talks? September

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What’s next?

28 July Discussion draft Interest deductions in the banking and

insurance sectors

Week of 8 August Discussion draft Branch mismatch arrangements

11-12 October Public

consultation

Attribution of profits to permanent

establishments and revised guidance on

profit splits

QUESTIONS?

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