Base Erosion & Profit Shifting | An update
Base Erosion and Profit Shifting, or ‘BEPS’ for short, has now filtered into the vocabulary of most finance professionals and it is being hailed as likely to cause the most significant change to international taxation in the last 30 years. BEPS is in fact a collection of many projects all designed to prevent perceived tax leakage to low tax jurisdictions. Peter Rioda, Director in Sanne’s Private Equity division, provides a summary of the BEPS initiatives and their current state of play. For readers who would like to focus in on key areas affecting their businesses, Tim Morgan of Mourant Ozannes who is leading the Jersey Funds Association’s response to BEPS provides this useful summary:
"The BEPS action points can be broadly split as follows. Firstly, actions 1 to 5 are aimed at addressing digital economy issues and the coordination of corporate tax in different jurisdictions. The final actions 11 to 14 focus on enhanced disclosure and dispute resolution mechanics. However it is articles 6 to 10, that focus on aligning tax to value creating activities, which will affect fund structuring the most and which we are seeing the most interest in. In particular, action 6 deals with the prevention of treaty abuse (as focussed on in the current OECD consultation on the access of non-CIV funds to treaties); action 7 deals with the prevention of artificial avoidance of permanent establishment; and actions 8 to 10 deal with the alignment of transfer pricing arrangements to the creation of value."