OECD draft addresses tax treaty shopping

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The OECD has invited comments on a discussion draft on proposed changes to the OECD model tax convention to prevent tax treaty abuse.

The OECD’s recent report on action 6 of the base erosion and profit shifting (BEPS) action plan recognised that further work would be needed on the precise contents of the model tax treaty provisions.

“Countries participating in the BEPS project have agreed on a minimum standard to prevent treaty shopping and other strategies aimed at obtaining inappropriately the benefit of certain provisions of tax treaties,” the OECD said on publication of the report in September.

It recognised that further work would be needed on the precise contents of the model provisions, including the limitation of benefits rule. Treaty abuse is “one of the most important sources of BEPS concerns”, according to the OECD action plan.

The discussion draft provides potentially affected businesses with the opportunity to comment on “how greater certainty could be provided through the model treaty and/or commentary” in a number of areas, Deloitte said in a briefing note.

The OECD’s Committee on Fiscal Affairs invited comments by 9 January, and a public consultation is scheduled for 22 January.

Exchange of information

The OECD also announced last week that Switzerland had become the 52nd jurisdiction to sign the multilateral competent authority agreement, which will “allow it to go forward with plans to activate automatic exchange of financial account information in tax matters with other countries beginning in 2018”. The decision is subject to the approval of the Swiss parliament, and voters may be asked to approve the move.

Fifty-one jurisdictions including the UK signed the agreement, which will “activate” automatic exchange of information, in Berlin last month.

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