On 22 January 2015 the OECD held a public consultation meeting to discuss the base erosion and profit shifting (BEPS) action 6 on the prevention of tax treaty abuse. The issue as presented in the OECD’s discussion draft on this issue and the follow-up work was introduced by the head of the OECD’s Tax Treaties Unit and after this some general comments were made on behalf of the business and advisory committee to the OECD (BIAC).
Discussions were held on the proposed limitation of benefits (LOB) provision and treaty entitlement as this would apply to collective investment vehicles (CIVs) and to non-CIV funds. Other issues in connection with the LOB were then discussed including the discretionary relief provision, the derivative benefits provision and the clarification of the “active business” provision.
A session was then held to discuss the Principal Purpose Test (PPT) rule and its interaction with the arbitration provision in the treaty article on the mutual agreement procedure. There was also discussion of the possibility of discretionary relief under the PPT rule, and the drafting of the alternative “conduit-PPT rule”.
Other issues discussed in connection with BEPS action 6 included the application of the new treaty tie-breaker rule; the design and drafting of the rule applicable to permanent establishments located in third countries; and the commentary on the interaction between treaties and national anti-abuse rules.
