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OECD - Base Erosion & Profit Shifting

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Chapter 6

OECD and G20 BEPS Action Plan: Changes to the International Tax System

• The (BEPS) Project, an ambitious plan undertaken jointly by the OECD and G20 to overhaul the global international tax system, culminated with a huge report of recommendations that, if adopted, could have a significant impact on cross-border trade.

Limit Base Erosion via Interest Deductions and Other Financial Payments

Develop recommendations regarding best practices in the design of rules to prevent base erosion through the use of interest expense, for example through the use of related-party and third-party debt to achieve excessive interest deductions or to finance the production of exempt or deferred income, and other financial payments that are economically equivalent to interest payments.

The work will evaluate the effectiveness of different types of limitations.

In connection with and in support of the foregoing work, transfer pricing guidance will also be developed regarding the pricing of related party financial transactions, including

• financial and performance guarantees,
• derivatives (including internal derivatives used in intra-bank dealings), and
• captive and other insurance arrangements.

The work will be co-ordinated with the work on hybrids and CFC rules.



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