The OECD has released a discussion draft that outlines approaches for addressing base erosion and profit shifting (BEPS).
Under Action 4 (Interest deductions and other financial payments) of the BEPS project. The draft discusses issues related to the banking and insurance sectors.
According to this new OECD release, the discussion draft does not change any of the conclusions in the BEPS Action 4 report. However, it does provide a more detailed consideration of the BEPS risks posed by banks and insurance companies, and those posed by entities in a group with a bank or insurance company (such as holding companies, group service companies, and companies engaged in non-regulated financial or non-financial activities).
A limited BEPS risk has been identified for banks and insurance companies, and the discussion draft explores:
Given the different risks faced by countries, the discussion draft does not propose a single approach, but provides that countries need to introduce rules to deal with their actual BEPS risks.
For other entities in a banking or insurance group, the discussion draft identifies a greater BEPS risk and recommends that countries consider applying the fixed ratio rule and group ratio rule to these entities, but with modifications in certain situations. In each situation, countries are allowed flexibility to take into account particular features of their tax law and policy.
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