OECD Tax TalksCENTRE FOR TAX POLICY AND ADMINISTRATION

5 December 2016

2:00pm – 3:00pm (CET)

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Join the discussion

Ask questions and comment throughout the webcast

Via e-mail CTP.Contact@oecd.org

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Topics

• Update on G20

• Inclusive Framework on BEPS

• Multilateral Instrument

• Tax policy

Update on G20

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• First Germany Presidency meeting, Berlin,1 Dec 2016

• German Presidency tax priorities:– Transparency– BEPS implementation– Tax and Development– Tax Certainty– Tax and digitalisation

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Update on G20 2017

• Next steps:

– G20 Finance Ministers, 17-18 March 2017

– G20 Leaders Summit: 7-8 July 2017

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Update on G20 2017

Inclusive Framework on BEPS

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• Latest developments

• Peer Review mechanisms

• Multilateral Instrument

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Inclusive Framework on BEPS

• Membership– 90 members, including most recently Macao China,

Ukraine and Mauritius– Meeting in BVI on 13 December to engage Caribbean

jurisdictions• Progress on establishing review mechanisms for

the four BEPS minimum standards• Next IF plenary meeting: January 2017

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Inclusive Framework on BEPS –Latest developments

• Action 5: FHTP – continuing review of patent boxes and transparency framework

• Action 6: Review will follow the MLI• Action 13: Start of review expected in 2017• Action 14: Reviews starting today

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Peer Review of the four BEPS Minimum Standards

Interpretation guidance issued: - last June on transitional issue (including on voluntary parent surrogate filing in the parent jurisdiction)

- this week on notification requirements for MNEs during a transitional period

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Action 13 – Guidance from the OECD

Country implementation information collected and published on OECD’s website this week:

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Action 13 – Providing information on jurisdictions’ implementation

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Action 14 – Context:Preventing and Resolving Disputes

• Co-operative taxpayer compliance programmes including taxpayer engagement programmes

• Bilateral APAs; advance rulings• Joint audits/examinations• Exchange of information

Preventing Disputes On OECD tax

agenda

• Domestic remedies (e.g. judicial, administrative or statutory dispute resolution process)

• MAP• Arbitration

Resolving Disputes

BEPS

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Action 14 – Dispute resolutionKey documents released on 20 October 2016

Peer Review Implementation of the Action 14 minimum standard compliance with implementation peer reviewed peer review to begin in 2016; first set of reports published in 2017 Peer review to be conducted based on Terms of Reference and Assessment Methodology

MAP Statistics Reporting reporting of MAP statistics in accordance with MAP statistics reporting framework

MAP Profile Publication of MAP profile in accordance with MAP Profile Template

• Publishing of MAP profiles on OECD website pursuant to agreed template is part of the Action 14 minimum standard

• New MAP profile: provide information in an easy to read format, structured around the four

key areas (preventing disputes; availability and access to MAP; resolution of MAP cases; implementation of MAP agreements)

contains more information, including: • New MAP profiles of most OECD and G20 countries already available on

the OECD website (www.oecd.org/tax/beps/country-map-profiles.htm)

• MAP profiles of all members of the Inclusive Framework forthcoming

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New MAP Profiles available

• MAP statistics for 2015 reporting period is now available - last reporting period for statistics provided under old format.

• For 2016 and subsequent years, MAP statistics of members of the BEPS Inclusive Framework will be reported and published pursuant to an agreed reporting framework:

Timely and complete reporting of MAP statistics is part of the Action 14 minimum standard

• Objectives of new MAP statistics reporting framework: Collaborative approach by competent authorities to resolution of MAP cases through use

of common start date regardless of which competent authority receives the MAP request from taxpayer

Consistency - reporting strictly based on defined terms Transparency - more detailed reporting of MAP cases and outcomes, including jurisdiction

specific reporting

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New MAP Statistics Reporting Framework

(C) Resolution of MAP cases

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Action 14 – Terms of Reference

(D) Implementation of MAP Agreements

(A) Preventing Dispute

TOR: Key features of an efficient & effective MAP process

(B) Availability and Access to MAP

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Action 14 – Assessment Methodology

Formal launch today

Evaluation of:• Legal framework - tax treaties,

domestic law & regulation• MAP programme guidance &

implementation of the minimum standard in law and practice

Jurisdiction specific report: • Identify & describe the

strengths and any shortcomings

• Recommendations to address shortcomings

First Stage 1 reports

published by 2017

2 stage approach

Stage 2: Peer Monitoring Process launched one year from the adoption of the Stage 1 Peer Review Report by the Inclusive Framework

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Action 14 – Assessment Methodology

Multilateral Convention to Implement Tax Treaty Related Measures to

Prevent Base Erosion and Profit Shifting

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• Why?– Bilateral renegotiations?– Model protocol to amend tax treaties?– Multilateral treaty to sit on top of and modify bilateral tax treaties

• What?– Implementing BEPS minimum standards of Action 6 and Action 14– Implementing the other treaty related BEPS measures– Optional provision on mandatory binding MAP arbitration

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MLI – Background

– Model protocol to amend tax treaties?– Multilateral treaty to sit on top of and modify bilateral tax treaties

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Key Features

More than 100 countries and jurisdictions involved

Parties can cover potentially thousands of treaties

Flexibility: options and reservations

Clarity & Transparency: Explanatory Statement, guidance, depositary tools

English and French text authentic. Countries will prepare additional language versions

Excluding specified tax treaties

Meeting a minimum standard in another way

Opting out of non-minimum standard provisions

Opting out of provisions for treaties with specific characteristics

Choices to apply optional and alternative provisions (including opting in to Part VI on Arbitration)

Flexible Instrument

Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting

MLI

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II

III

IV

VII

Preamble

Part I (Scope and Interpretation of Terms)

Part II (Hybrid Mismatches)

Part III (Treaty Abuse)

Part IV (Avoidance of Permanent Establishment Status)

Part V (Improving Dispute Resolution)

Part VI (Arbitration)

Part VII (Final Provisions)

VI

V

Hybrid Mismatches – Action 2 & Action 6II

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4

5

Transparent entities1. New Article 1(2) OECD MTC2. Changes to exemption or credit method3. Interaction with savings clause

Dual Resident EntitiesNew Article 4(3) OECD MTC

Application of Methods for Elimination of Double TaxationThree options reflecting alternative ways in whichcountries may address problems arising from the inclusion of the exemption method in treaties with respectto items of income that are not taxed in the source state.

Treaty Abuse (Highlights) – Action 6III

7 Action 6 minimum standard – Prevention of Treaty Abuse Flexibility on how to meet the minimum standard

Reminder:• Principal Purpose Test (PPT) only;• PPT and simplified or detailed LOB Provision, OR• Detailed LOB provision + mechanism against conduit

arrangements

MLI: 1. PPT

Follows paragraph 26 of the Action 6 Report

2. Alternative: Simplified LOB Provision

3. Opt-out of PPT and reach bilateral agreement on detailed LOB

Arbitration – Action 14VI

Reflects work of the Sub-Group on Arbitration

OptionalApplies only between Parties that expressly choose to apply Part VI

Different types of Arbitration Processes• Default rule: “Final offer arbitration”• Alternative: “Independent opinion arbitration”

FlexibilityCompetent authorities may mutually agree on different rules, which may apply to all cases or to a particular case

Country Y - Artificial Avoidance of the Permanent Establishment Status13

Reserve on entire Art 13

• Substantive provisionSometimes including different options

• Compatibility clause

• Reservation clause

• Clarity: Notification clause

reflecting choice of options

• Certainty: Notification clause

clarifying existing provisions within scope

Art 5(4.1) OECD MTC – Fragmentation

Option A or Option BOption A – Art 5(4) OECD MTC

Option B – Par. 30.1. Commentary Art 5(4)

None

Reserve on Option A for certain CTAs

Reserve on fragmentation provision

Compatibility clause

2-3

4

5

6

7-8

Make notification here Art 5(4) of the Convention with X

Notify choice for Option A

Option A – Art 5(4) OECD MTC

Country Y - Prevention of Treaty Abuse7

Reserve an agree on LOB bilaterally

Option A or Option BPrincipal Purpose Test

Principal Purpose Test and simplified LOB

Reserve for certain CTAs

Reserve on S-LOB for certain CTAs

1/8-13

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Principal Purpose Test

Tax Convention with Country B15 July 1953

Tax Convention with Country F21 April 1981

Tax Convention with Country G18 March 1983

Tax Convention with Country T1 December 2001

Tax Convention with Country X18 July 2015

Covered Tax Agreements of Country Y

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Tax Convention with Country C23 July 1972

Tax Convention with Country M2 October 1989

Tax Convention with Country P30 June 1992

Tax Convention with Country V1 December 2001

Tax Convention with Country Y18 July 2015

Covered Tax Agreements of Country X

2

Country X

Country Y

Depositary tool

Impact on the tax convention between Country X and Country Y13

Art 5(4.1) does not apply (Country Y reserved)

Compatibility clause:

Option A applies in place of the relevant parts of

Article 5(4) of the X-Y Convention that describe a list

of specific activities deemed not to constitute a

permanent establishment even if the activity is

carried on through a fixed place of business.

2-3

4

5

6

7-8

Option A applies – Principles of Art 5(4) MTC

Country Y - Artificial Avoidance of the

Permanent Establishment Status

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Reserve on entire Art 13

Art 5(4.1) OECD MTC – Fragmentation

Reserve on Option A for certain CTAs

Reserve on fragmentation provision

Compatibility clause

2-3

4

5

6

7-8 Notified Option A

Option A –Art 5(4) OECD MTC

Notified Art 5(4) of the Convention with X8

Country X - Artificial Avoidance of the Permanent Establishment Status13

Reserve on entire Art 13

Art 5(4.1) OECD MTC – Fragmentation

Reserve on Option A for certain CTAs

Reserve on fragmentation provision

Compatibility clause

2-3

4

5

6

7-8 Notified Option A

Option A –Art 5(4) OECD MTC

Notified Art 5(4) of the Convention with Y8

Domestic procedures for ratification

Domestic procedures for signature

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MLI – Timeline

October 2015

November 2016

June 2017 Entry into

Force

Entry into

Effect

Explanatory Statement

GuidanceDepositary tools

• Matching exercises– Speed dating meeting February 2017– Facilitating bilateral contacts

• Enhancing clarity – Software tools– Consolidated texts – support and guidance

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MLI – Further OECD work

• Preparation for signature• Signing ceremony

– Participation of significant number of countries expected– Week of 5 June 2017

Back-to-back with OECD Ministerial Council Meeting

• Ratification– Procedures vary per country– Translations, language versions and addressing differences of language

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MLI – Next Steps

Tax Policy

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• G20 Leaders' Communique Hangzhou Summit, 4-5 Sept 2016“We emphasize the effectiveness of tax policy tools in supply-side structural reform for promoting innovation-driven, inclusive growth, as well as the benefits of tax certainty to promote investment and trade and ask the OECD and IMF to continue working on the issues of pro-growth tax policies and tax certainty”

• OECD requested by G20 to work on tax certainty, with IMF • OECD likely request by G7 to work on inclusive growth

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Background

• Initial report to G20– Source of tax uncertainty

• Working on final report– Practical measures to effectively, concretely make the system

more certain

• Important inputs for the project– Business survey– Survey of tax administrations– Consultation with other stakeholders

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Tax certainty – Work scope

• Completely anonymous, and results will be aggregated• Introductory sections on characteristics of the firm• Two final sections with very practical questions about sources and

solutions for more certainty in tax system• Some innovative solutions such as Multilateral APAs, Multilateral

audits, Multilateral cooperative compliance programmes• None of the questions are compulsory• To date: 244 completed responses, with +6000 still uncompleted

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Tax certainty – Survey of business

• Deadline: 16 December 2016

http://bit.ly/oecd-tax-business-survey• Responding will make a difference• Consultation also with tax administrations & civil society• Report with results presented to G20 in March 2017• Feed directly into G20 tax policy

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Tax certainty – Next steps

• Report in May for G7 Finance Ministers• Work should be seen in context of latest

Revenue Statistics results where we see:– The average tax to GDP ratio for OECD countries in 2015 was

34.3%, the highest since 1965– Since the financial crisis, tax revenues have shifted

towards labour (PIT + SSCs) and consumption(particularly VAT)

– Corporate tax revenues have not yet returned to their pre-crisis levels as a percentage of GDP, or total tax revenues.

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Tax and Inclusive Growth

What’s next?

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• BEPS implementation

• MLI implementation

• CRS implementation

• US tax reform?

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What’s next?

Questions?

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Join the discussion

Via e-mail CTP.Contact@oecd.org

Via Twitter using #OECDTaxTalks