The Organisation for Economic Cooperation and Development (OECD) today released a discussion draft concerning branch mismatch structures under Action 2 (Neutralising the effects of hybrid mismatch arrangements) of the base erosion and profit shifting (BEPS) project.
Recommendations under the BEPS Action 2 report, on neutralising the effects of hybrid mismatch arrangements, for domestic rules designed to neutralise mismatches in tax outcomes that arise in respect of payments under a hybrid mismatch arrangement. Among the recommendations of the BEPS Action 2 report are rules targeting payments made by or to a hybrid entity that give rise to one of three types of mismatches:
The BEPS Action 2 report includes specific recommendations for improvements to domestic law intended to reduce the frequency of these types of mismatches as well as for targeting hybrid mismatch rules that adjust the tax consequences in either the payer or payee jurisdiction in order to neutralise the hybrid mismatch without disturbing any of the other tax, commercial or regulatory outcomes.
As noted in today’s OECD release, the discussion draft under BEPS Action 2 applies the analysis and recommendations set out in the BEPS Action 2 report to mismatches that can arise through the use of branch structures. The discussion draft:
Comments are invited on the discussion draft, and are due by 19 September 2016.
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