Within the Base Erosion and Profit Shifting initiative, the OECD have released a guide on how the organisation will evaluate a countries readiness to refuse tax treaty benefits to multinationals which unsuitably try to claim them. The Organisation for Economic Co-operation and Development (OECD) have published a discussion draft which refers to transfer pricing of intangibles that are hard-to value.
Following this, the OECD have updated their BEPS Action 6 in order to stop inappropriate access to treaty benefits aka “treaty shopping”.
And so, the new version of the BEPS Action 6 hopes to tackle treaty shopping by introducing double tax treaties of:
– The Principal Purpose Test (PPT) which is an anti-abuse regulation that evaluates the main purpose of the arrangements/transactions in question.
– A Limitation on Benefits Rule (LOB) which minimizes the accessibility of treaty benefits to bodies that meet specific criteria.
The OECD’s January 2017 discussion document states 3 example drafts which should be incorporated in OECD’s guide. This is in order to add some clarification in relation to the framework of the PPT, regarding non-CIVs (Collective Investment Vehicle).