Within its scope of stimulating economic progress and international trade, the OECD published, on March 21st, its fifth annual peer review report, which had as its main objective to examine how countries are dealing with the base erosion and profit shifting (BEPS).
The report, following the structure of the previous four, has eight chapters and it is divided as follows:
- “Implementation of the minimum standard: Aggregate data and key figures”;
- “Key role of the BEPS MLI”;
- “Plans for the implementation of the minimum standard and support provided to jurisdictions”;
- “Recommendations”;
- “Difficulties in implementing the minimum standard”;
- “Conclusion and next steps”;
- “Background on the Action 6 minimum standard and peer review”;
- “Jurisdictional sections”.
One of the OECD’s most visible projects is the so-called ‘BEPS Action 6’, which made OECD/G20 members commit to strengthening their tax conventions through the application of anti-abuse measures, especially with regard to the treaty shopping.
Briefly, treaty shopping refers to the attempt by an individual or entity to become a tax resident in a jurisdiction only with the intention of accessing the network of agreements to avoid double taxation executed by that same jurisdiction.
Taking the phenomenon into consideration, the published report focuses on the implementation of the Action 6 minimum standard related to the prevention of treaty abuse. Among the Latin American countries that make up the so-called “OECD Inclusive Framework” are, for example, Brazil, Argentina, Chile and Uruguay.
Unlike the aforementioned countries, Brazil has not signed the MLI (Multilateral Treaty), but the report portrays that 4 of its 36 tax agreements meet the minimum standard and that it is on track to implement the measures in another 28 of its agreements.
In this regard, the jurisdictions have agreed to include in their tax treaties an express statement that their ‘common intention’ is to eliminate double taxation without creating opportunities for non-taxation or reduction of taxation through tax evasion or avoidance.
Next Steps
The implementation of the minimum standard established in Action 6 through the annual report, especially the actions taken to follow up on the recommendations made, as well as the measures to comply with the implementation plans will continue to be monitored.
For the next year, there will be an update on actions taken by each jurisdiction that received a recommendation, as well as an update on the status of each implementation plan.
Contact us for further information.
Published on May 15, 2023