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The OECD has published a progress report setting out the major tax developments that took place in the last year concerning the OECD’s base erosion and profit shifting (BEPS) project.
The Second Annual Progress Report of the OECD-G-20 Inclusive Framework on BEPS was published as Annex 1 to the OECD Secretary-General Tax Report to the G-20 Finance Ministers and Central Bank Governors, which was released on July 22, 2018, for the G-20 Finance Ministers meeting in Buenos Aires, Argentina.
The report is divided into three parts. Part 1 describes the major developments comprising the work on addressing the tax challenges of the digitalization of the economy and the coming into force of the BEPS Multilateral Instrument.
Part 2 describes the progress in respect of the peer reviews of the BEPS minimum standards.
Part 3 describes the wider BEPS implementation. These are followed by three annexes providing information on the membership of the Inclusive Framework on BEPS (Annex A), a list of the BEPS Action Items and a guide to where this work is done within the OECD (Annex B), and a detailed description of the use of country-by-country (CbC) reporting data to measure BEPS (Annex C).
The report notes that a number of US tax reform measures encompass areas covered by the BEPS project, including provisions against hybrid mismatch arrangements (BEPS Action 2), enhanced controlled foreign corporations rules (BEPS Action 3), and limitation of interest deductibility (BEPS Action 4). The Netherlands too, the report states, recently proposed a major reform aimed at implementing a number of BEPS measures.
The report further notes that the EU agreed important anti-avoidance directives (ATAD 1 and 2) that incorporate BEPS measures, including on branch mismatch arrangements and limitation to interest deductibility, that are being incorporated by all EU member states with deadlines starting in 2019.
Some of the highlights from the report are:
- Entry of BEPS Multilateral Instrument into force on July 1, 2018, following ratification by five countries, with the first modifications having effect as from January 1, 2019;
- The Inclusive Framework on BEPS now comprises 116 members representing over 95 percent of global GDP;
- Delivery of an interim report to the G-20 Finance Ministers on the tax challenges posing the digital economy;
- 175 preferential tax regimes have been reviewed, and more than 130 regimes have already been amended or abolished or are in the process of being amended or abolished (BEPS Action 5);
- Over 17,000 rulings have already been identified and information is now being sent to the tax administrations that need it (BEPS Action 5);
- The first annual peer review report of BEPS Action 13 (CbC reporting), comprising a comprehensive examination of 95 jurisdictions; and
- Improvement of mutual agreement procedures (MAP), with 21 jurisdictions already subject to peer reviews. MAP country profiles for over 80 countries have been published to increase transparency of the MAP processes in those countries.