Draft toolkit, addressing taxation of offshore indirect transfers of assets

Draft toolkit, offshore indirect transfers of assets

A joint initiative of the IMF, OECD, UN, and World Bank Group is seeking public feedback on a “draft toolkit” that is intended to help developing countries address the complexities of taxing offshore indirect transfers of assets.

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According to an OECD release, the practice of indirect transfers of assets by some multinational corporations is viewed as an attempt to minimize their tax liability. The tax treatment of offshore indirect transfers—that is, the sale of an entity located in one country that owns an "immovable" asset located in another country, by a non-resident of the country where the asset is located—has emerged as a “significant concern” in many developing countries. The OECD and other parties to the joint initiative report that these transfers have become a relatively common practice for some multinational corporations trying to minimize their tax burden, and reflect an increasingly critical tax issue.

The OECD release notes that there is no unifying principle on how to treat these transactions, and the issue was not addressed in the OECD/G20 base erosion and profit shifting (BEPS) project. Accordingly, the draft toolkit:

  • Examines principles to guide the taxation of these transactions in the countries where the underlying assets are located
  • Focuses on extractive (and other) industries in developing countries
  • Considers the current standards in the OECD and the UN model tax conventions, and the new multilateral convention (MLI)
  • Discusses economic considerations that may guide policy in this area, the types of assets that could appropriately attract tax when transferred indirectly offshore, implementation challenges that countries face, and options that could be used to enforce such a tax

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