OECD releases new BEPS draft dealing with tax treaty abuse

The OECD on May 22 released a revised discussion draft under the OECD/G20 base erosion and profit shifting (BEPS) plan dealing with the prevention of tax treaty abuse.

The draft, prepared by Working Party 1 of the OECD’s Committee on Fiscal Affairs (WP1), is the third draft on the topic. If follows a November 21 draft  on treaty abuse which asked for feedback on about 20 issues associated with the project. The new draft reflects the agreement of WP1 on how to best handle many of issues raised in the earlier draft.

The draft adds an alternative simplified limitation on benefits rule designed to be used by countries that also adopt a principal purpose test to prevent treaty abuse.

The draft also includes a new proposal offered by the US to deal with tax avoidance through use of special tax regimes which is designed to alleviate some countries’ objections to the addition of a derivative benefits rule to the model treaty. Similar provisions were proposed in draft revisions to the US model treaty released earlier this week.

Comments on the revised OECD draft should be submitted by June 17. No hearing will be held on the proposal.

See:

• Revised discussion draft BEPS ACTION 6:PREVENT TREATY ABUSE 22 May 2015–17 June 2015

Related MNE Tax articles:

• OECD releases BEPS discussion draft on preventing treaty abuse

• OECD releases 178 comments to BEPS drafts on treaty abuse and artificial avoidance of PEs

• Proposed updates to US model tax treaty address stateless income, corporate inversions, limitation on benefits

• OECD BEPS guidance includes anti-treaty shopping rules, country-by-country reporting requirements