On 24 March 2020 the OECD published the second peer review report on the implementation by countries of the minimum standard under Action 6 of the action plan on base erosion and profit shifting (BEPS). This is the second peer review report under BEPS action 6 and looks at efforts made by countries to prevent the abuse of tax treaties by taxpayers. The report covers all the countries that were members of the inclusive framework on BEPS at 30 June 2019.

The report notes that the majority of countries having been taking action to prevent treaty abuse and are engaged in modifying their treaty networks. Many countries have made substantial progress in implementing the minimum standard. In many cases countries have taken action by signing the multilateral instrument (MLI) to include tax treaty related BEPS measures into bilateral tax treaties. The coverage of the MLI is expected to increase rapidly as more countries with large treaty networks sign and ratify the convention.

Treaty abuse can take place by extension of benefits to a taxpayer in a third jurisdiction in a way that was not intended by the treaty. Taxpayers may also abuse a treaty by avoiding taxation altogether on an item of income (double non-taxation) or by ensuring that income is inadequately taxed.

Members of the BEPS Inclusive Framework are committed to including provisions in their double tax treaties to ensure that the treaties are protected against abuse by taxpayers. Under the minimum standard countries are including in their bilateral tax treaties a statement on non-taxation, usually in the preamble. They also need to include one of the methods to protect treaty shopping, for example using specific or general anti-abuse rules.

The MLI is a multilateral agreement under which countries can quickly and effectively amend their bilateral tax treaty provisions. Countries have flexibility under the MLI as to which provisions they agree to modify.

The first peer reviews on the implementation of the minimum standard under BEPS action 6 were performed in 2018. The latest report relates to the second peer reviews carried out in 2019. The peer review process for 2020 is now taking place.