With a number of important recent and upcoming developments in the OECD's international tax work, we invite you to join the OECD's Centre for Tax Policy and Administration (CTPA) for the latest tax update. More information: http://oe.cd/taxtalks

1. OECD Tax Talks
CENTRE FOR TAX POLICY AND ADMINISTRATION
5 December 2016
2:00pm – 3:00pm (CET)

2. 2
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3. 3
Topics
• Update on G20
• Inclusive Framework on BEPS
• Multilateral Instrument
• Tax policy

4. Update on G20
4

5. • First Germany Presidency meeting, Berlin,
1 Dec 2016
• German Presidency tax priorities:
– Transparency
– BEPS implementation
– Tax and Development
– Tax Certainty
– Tax and digitalisation
5
Update on G20 2017

6. • Next steps:
– G20 Finance Ministers, 17-18 March 2017
– G20 Leaders Summit: 7-8 July 2017
6
Update on G20 2017

7. Inclusive Framework
on BEPS
7

8. • Latest developments
• Peer Review mechanisms
• Multilateral Instrument
8
Inclusive Framework on BEPS

9. • 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
9
Inclusive Framework on BEPS –
Latest developments

10. • 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
10
Peer Review of the four BEPS Minimum
Standards

11. 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
11
Action 13 – Guidance from the OECD

12. Country implementation information collected and published on OECD’s
website this week:
12
Action 13 – Providing information on
jurisdictions’ implementation

13. 13
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

14. 14
Action 14 – Dispute resolution
Key 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

15. • 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
15
New MAP Profiles available

16. • 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
16
New MAP Statistics Reporting
Framework

17. (C) Resolution of MAP cases
17
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

18. 18
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

19. 19
Action 14 – Assessment Methodology

20. Multilateral Convention to
Implement Tax Treaty
Related Measures to
Prevent Base Erosion and
Profit Shifting
20

21. • 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
21
MLI – Background
– Model protocol to amend tax treaties?
– Multilateral treaty to sit on top of and modify bilateral tax treaties

22. 22
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

23. 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

24. Multilateral Convention to Implement Tax Treaty Related
Measures to Prevent Base Erosion and Profit Shifting
MLI
I
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

25. Hybrid Mismatches – Action 2 & Action 6II
3
4
5
Transparent entities
1. New Article 1(2) OECD MTC
2. Changes to exemption or credit method
3. Interaction with savings clause
Dual Resident Entities
New Article 4(3) OECD MTC
Application of Methods for
Elimination of Double Taxation
Three options reflecting alternative ways in which
countries may address problems arising from the inclusion
of the exemption method in treaties with respect
to items of income that are not taxed in the source state.

26. 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

27. Arbitration – Action 14VI
Reflects work of the Sub-Group on Arbitration
Optional
Applies only between Parties that expressly
choose to apply Part VI
Different types of Arbitration Processes
• Default rule: “Final offer arbitration”
• Alternative: “Independent opinion arbitration”
Flexibility
Competent authorities may mutually agree on different
rules, which may apply to all cases or to a particular case

28. Country Y - Artificial Avoidance of the
Permanent Establishment Status
13
Reserve on entire Art 13
• Substantive provision
Sometimes 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 hereArt 5(4) of the Convention with X
Notify choice for Option A
Option A – Art 5(4) OECD MTC

29. 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
15
Principal Purpose Test

30. Tax Convention with Country B
15 July 1953
Tax Convention with Country F
21 April 1981
Tax Convention with Country G
18 March 1983
Tax Convention with Country T
1 December 2001
Tax Convention with Country X
18 July 2015
Covered Tax Agreements
of Country Y
2
Tax Convention with Country C
23 July 1972
Tax Convention with Country M
2 October 1989
Tax Convention with Country P
30 June 1992
Tax Convention with Country V
1 December 2001
Tax Convention with Country Y
18 July 2015
Covered Tax Agreements
of Country X
2
Country
X
Country
Y

31. Depositary
tool
Impact on the tax convention between
Country X and Country Y
13
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
13
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 Status
13
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

32. Domestic procedures
for ratification
Domestic procedures
for signature
32
MLI – Timeline
October
2015
November
2016
June 2017 Entry
into
Force
Entry
into
Effect
Explanatory
Statement
GuidanceDepositary
tools

33. • Matching exercises
– Speed dating meeting February 2017
– Facilitating bilateral contacts
• Enhancing clarity
– Software tools
– Consolidated texts – support and guidance
33
MLI – Further OECD work

34. • 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
34
MLI – Next Steps

35. Tax Policy
35

36. • 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
36
Background

37. • 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
37
Tax certainty – Work scope

38. • 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
38
Tax certainty – Survey of business

39. • 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
39
Tax certainty – Next steps

40. • 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.
40
Tax and Inclusive Growth

41. What’s next?
41

42. • BEPS implementation
• MLI implementation
• CRS implementation
• US tax reform?
42
What’s next?

43. Questions?
43

44. 44
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