Massive impact on tax planning expected: OECD presents plans to fight BEPS

Published 06 October 2015 by RUF UND SCHLENKER

Yesterday, OECD has published its plan to fight aggressive tax planning schemes (Base Erosion and Profit Shifting - BEPS). The plan includes 15 measures and aimes at minimizing profit shifting activities especially in terms of immaterial assets (i.e. licenses) as well as regarding so called hybrid financing structures 

The G20 finance ministers are expected to pass the measures at their Meeting in Lima on 8 October 2015.

In the past, especially inter-European tax planning structures have raised questions of low taxation in some of the countries. At the forefront, the German finance minister is "deeply worried" about the tax planning activities of big multinationals and the resulting “tax loss”. Most of the tax schemes include Ireland, Netherland as well as Malta and harm economies with higher corporate tax levels. The one thing all schemes have in common is the goal of minimizing tax exposure.

Hybrid financing structures are structures which are treated differently at two jurisdictions (e.g.: tax deductible interest expense in one country, tax exempt dividend in the receiving jurisdiction).

In Lima, the finance ministers will now announce the measures how to fight the above schemes: Country-by-country reporting.

However, the measures are controversial already: Since massive amounts of data will (and sometimes are already) be shared with foreign tax authorities, some sources claim that this might be a breach of tax secrecy. Certain sources in literature state that some courts already have put a hold on the sharing of tax information in certain cases. Tax authorities argue that this procedure is covered by the concluded double tax treaties.

Further, by providing data on certain tax matters to other countries, tax authorities have to make sure that the provided data
a) is accessible and processible by the local tax authorities of each country and that
b) the data is actually used in the taxation process of the respective country.

German article on the Topic see here.