The OECD’s second action point in the BEPS Action Plan is to “neutralise the effects of hybrid mismatch arrangements”. Our commentary, and links to content, on action 2 are included here.
21 February 2014
There has been much speculation about what will be in the OECD’s proposed Discussion Draft of recommendations on tackling hybrid mismatches but dates …
have now been announced provisionally by the OECD for publication of the draft (4 April), the deadline for comments to be made to the OECD (4 May) and a public consultation meeting at the OECD (15-16 May).
2 September 2013
Various countries (e.g. Denmark, Germany, UK) have in the past taken actions through domestic law provisions. These are likely to contribute to the …
design of what is considered best practice – and the OECD already has done detailed work in this area in identifying problems and possible solutions (see our bulletin on the OECD report on Hybrid Mismatch Arrangements of March 2012).
26 July 2013
An interesting point of interest in this area is the extent to which the coherence of tax rules to produce a level playing field between MNCs and nationally-based entities …
has become a more important influence in some territories. MNCs should not, they suggest, have access to more sophisticated planning techniques than those entities operating solely within a domestic market. This line of argument clearly adds pressure for action against hybrids.
19 July 2013
As indicated in the Action Plan, the focus on hybrids is premised on the need to address gaps created by the interactions between domestic tax laws. The Plan states …
there is a need to create standards to establish international coherence in corporate income taxation. The action on hybrids in particular is explained by reference to the use of such instruments to achieve unintended double non-taxation or long-term tax deferral (e.g. by double deductions, or generating deductions without corresponding income inclusions).
The action point is multi-faceted and includes work on the Model Treaty and recommendations for domestic law change. Model Treaty provisions are to be developed to prevent undue benefits under treaties for such hybrid arrangements (presumably countering the ability of such instruments to access treaty withholding tax reductions) and various changes for domestic law are to be considered, primarily in relation to deductibility. The work on hybrids will be coordinated with the work on interest expense deduction limitations, CFCs and treaty shopping (see below). On hybrids in particular, the OECD presumably has a head start from its recent work culminating in its report on Hybrid Mismatch Arrangements, as discussed in our April 2012 Bulletin.
The Action Plan calls for recommendations in relation to the Model Treaty and domestic law to be completed within one year, by September 2014.