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BEPS, MLI software, effect of U.S. not signing MLI, tax transparency, updated Transfer Pricing Guidelines: latest from OECD

BEPS, Blog, Checkpoint, ONESOURCE, Transfer Pricing July 3, 2017

The OECD’s latest Tax Talks webcast held on June 26, 2017 covered the latest developments on the international tax agenda, including BEPS and tax transparency.

On BEPS in general, Pascal Saint-Amans, Director, OECD Centre for Tax Policy and Administration, said that more than 95% of the world’s economy had committed to, and was implementing, BEPS measures. He said that at the G20 Summit coming up on 8 July in Hamburg, the OECD will report on BEPS developments, tax transparency, and implementation of policy on tax certainty.

BEPS MLI software coming

Saint-Amans said that software will soon be released that will facilitate the matching of reservations that have been made by countries that have signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI).

Maikel Evers, OECD Advisor, Tax Treaties, said the OECD expects to shortly make available on its website a Beta version of the matching database the OECD has been developing with various countries. All signatories to the MLI will be on the database. The database covers each article of the MLI per country. He said the OECD is checking over 150,000 data points with countries to contribute to the database. He said the OECD hopes to have the database online as early as possible in July 2017. Users will be able to delve into the database to, among other things, see for example why an MLI article would not apply for a certain country, and to facilitate the matching of country reservations.

Evers said MLI signatories so far cover a third of all existing tax treaties and that 1,000 treaties were already waiting for a match.

BEPS Peer Reviews

Achim Pross, OECD Head of International Cooperation and Administration, discussed the BEPS Action item Peer Review process concerning Actions 5, 13 and 14.

On Action 5 (Countering harmful tax practices – Preferential Tax Regimes), he said the OECD was looking at 125 preferential tax regimes: IP regimes (31 regimes); headquarters; financing and leasing; banking and insurance; service and distribution centers; shipping; and dual category. The Peer Review on Action 5 is due out in January 2018.

Pross said that concerning spontaneous (automatic) exchange of information on rulings, thousands of rulings have so far already been exchanged and more are being exchanged.

On Action 13 (Country-by-country reporting), Pross said the OECD is keen to publish guidance on CbC reporting when MNEs request it.

With respect to domestic frameworks for CbC filing, he said that:

  • 55 jurisdictions had taken steps to implement a CbC filing obligation on MNE groups.
  • 30 jurisdictions already have a full legal framework for CbC reporting in place.
  • 38 jurisdictions are implementing an obligation for MNEs to submit a master file and local file.

Concerning the international framework for exchange, Pross said:

  • Over 850 bilateral exchange relationships have been activated under the CbC MCAA (Multilateral Competent Authority Agreement) to date.
  • A total of 64 jurisdictions have signed the CbC MCAA.

He said the OECD is working closely with developing countries to ensure they can benefit from CbC reporting.

Concerning Action 14 (Dispute resolution – MAP), Pross said the first six countries in the Peer Review process had been approved – they are the US, UK, Canada, Belgium, Switzerland, and the Netherlands. These Reviews will be published soon. Australia is in a batch of countries for peer review in December 2017.

Saint-Amans noted that the peer review on Action 6 (Treaty shopping) will be started soon.

Updated OECD Transfer Pricing Guidelines

Pascal Saint-Amans said the OECD’s Transfer Pricing Guidelines have been updated to incorporate some of the BEPS work on transfer pricing and those updated Guidelines will be made public during the week beginning July 3, 2017.

Automatic exchange of information

Monica Bhatia, Head of the Global Forum Secretariat, advised that in September 2017, the first 50 jurisdictions will exchange financial account information. She said those jurisdictions committed to exchange of information in 2017 all have their domestic legislation in place for this.

The OECD Common Transmission System (an IT system) for information exchanges is scheduled to be fully operational for the first exchanges in September 2017. Pross said the Transmission System is designed to enable point-to-point exchange of information between 2 competent authorities. It is a bilateral exchange mechanism whereby the data transfers from one competent authority to another. Initially, he said the System will be used for transferring financial accounts data under CRS, but will also be used for exchanges more generally under BEPS (e.g., for CbC reporting, rulings exchanges).

Saint-Amans said the OECD is currently assessing domestic legislation passed by countries to implement automatic exchange of information.

Effect of US not signing MLI – “not much”

As part of a Q&A session at the end of the webcast, Pascal Saint-Amans said a question was asked as to what was the impact on the MLI of the US not signing it. His answer was “not much” as the US is known as not having treaties with tax havens. He said the US has strong limitation on benefits (LoB) provisions in its tax treaties which means it probably meets the Action 6 minimum standard and doesn’t need to sign the MLI.

Saint-Amans said that while he would have preferred that the US sign up to the MLI’s BEPS action 7 PE definitions, he acknowledged that many countries had signed the MLI but reserved on the PE standard, so this was still something of a work-in-progress.

He said it was unfortunate for the US to miss the opportunity to sign up for mandatory binding arbitration with 25 other countries (although he noted that was a decision by the previous US administration).

Other matters

Achim Pross said the OECD expects to publish a report on branch mismatch arrangements in July 2017.

What’s next?

  • July 8, 2017 – report by the OECD Secretary-General to G20 leaders in Hamburg.
  • September 2017 – first exchanges under CRS. Saint-Amans said this will be a test of how the Common Transmission System works.
  • Ongoing BEPS Peer Reviews.
  • Work continuing on the tax challenges of the digital economy.

 

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