This OECD report calls for a very significant rewrite of both the OECD Model Tax Convention and the Commentary, including a US-style Limitation of Benefits (LoB) article as well as a main purpose anti-abuse rule. A variety of other anti-abuse measures are also proposed. If the recommendations are widely adopted, they will undoubtedly reduce treaty abuse, but also create significant uncertainty for international business. Given that tax treaties play such a critical role in removing barriers to cross-border trade and investment the primary concern with these OECD proposals is that their focus on combating treaty shopping will have a disproportionate impact on cross-border commercial activity.
Click here to read more about the OECD’s discussion draft of 14 March 2014 on Action 6 of the Base Erosion and Profit Shifting (BEPS) project.