On 27 August 2024 the OECD released an update on the reviews by the Forum on Harmful Tax Practices of aspects of the tax regimes of some member countries of the Inclusive Framework under Action 5 of the project on base erosion and profit shifting (BEPS). The member countries of the Inclusive Framework on BEPS are committed to implementing the Action 5 minimum standard and to participating in the peer review.
Following the latest reviews, the FHTP has determined that the tonnage tax regimes in Croatia and Bulgaria do not have harmful features. The tax regime under the Investment Promotion Act in Croatia is still under review. The Forum noted that the profits tax concession in Hong Kong SAR for aircraft lessors and leasing managers is not harmful; and incorporates grandfathering in accordance with FHTP requirements.
The update notes that the intellectual property (IP) part of the free economic zones in Armenia has been abolished and that substance requirements are in place for the non-IP elements of the regime. Also, the ring-fencing of the regime has been removed.
Also the IP element of the special economic zones in Eswatini has been abolished, subject to the adoption of the final legislation, and the ring-fencing of the regime has been removed. Substance requirements are in place for the non-IP elements of the regime, subject to adoption of the legislation.
The latest reviews bring the total number of regimes reviewed by FHTP to 326. More than 40% of the regimes reviewed by the FHTP have been abolished or are in the process of being abolished.
The FHTP reviews preferential tax regimes to identify features that could facilitate BEPS and potentially erode the tax base of other countries. The Forum also examines the substantial activities requirements in countries with no or low tax, ensure there is a level playing field. The FHTP is also involved in the peer review and monitoring of the BEPS Action 5 transparency framework through the exchange of relevant information on taxpayer-specific rulings.