OECD BEPS: OECD Releases Public Discussion Drafts And Receives Comments In Respect Of Action 2 (Hybrid Mismatch Arrangements) And Action 6 (Prevent Treaty Abuse)

In March, the OECD released its discussion drafts in respect of Action 2: "Neutralise the Effects of Hybrid Mismatch Arrangements—Recommendations for Domestic Laws" and "Neutralise the Effects of Hybrid Mismatch Arrangements—Treaty Issues" and Action 6: "Preventing the Granting of Treaty Benefits in Inappropriate Circumstances."

Key recommendations with respect to Action 2 (Hybrid Mismatch Arrangements) are (i) to eliminate hybrid mismatches by including targeted anti-hybrid rules in domestic law with respect to hybrid instruments, tax ownership mismatches, and (reverse) hybrid entities, which link the domestic tax treatment to the tax treatment in other relevant foreign countries, and (ii) to add a specific anti-abuse provision to the OECD Model Convention.

Key recommendations with respect to Action 6 (Prevent Treaty Abuse) are to modify the OECD Model Convention to include (i) a reference in the title and the preamble to prevention of tax avoidance and the creation of opportunities for non-taxation or reduced taxation, (ii) a limitation on...