This report sets out recommendations for domestic rules to neutralise the effect of hybrid mismatch arrangements and includes changes to the OECD Model Tax Convention to address such arrangements. Once translated into domestic law, the recommendations in Part 1 of the report will neutralise the effect of cross-border hybrid mismatch arrangements that produce multiple deductions for a single expense or a deduction in one jurisdiction with no corresponding taxation in the other jurisdiction. Part 1 of the report will be supplemented by a commentary, which will explain the recommended rules and i
Foreword; Table of contents; Abbreviations and acronyms; Executive summary; Summary of Part I; Summary of Part II; Introduction; Previous work undertaken by the OECD on hybrid mismatch arrangements; BEPS Action Plan; Part I - Recommendations for the design of domestic rules; Chapter 1.Definition of hybrid mismatch arrangement; Arrangement results in a mismatch in the tax treatment of a payment; Arrangement contains a hybrid element that causes a mismatch in tax outcomes; Mismatch in tax outcomes lowers the aggregate tax paid by the parties to the arrangement
Chapter 2.Arrangements that produce D/NI outcomesRecommended hybrid mismatch rule for financial instruments; Other recommendations for the tax treatment of financial instruments; Recommended hybrid mismatch rule for disregarded payments made by a hybrid payer; Recommended hybrid mismatch rule for reverse hybrids; Specific recommendations for the tax treatment of reverse hybrids; Chapter 3.Arrangements that produce DD outcomes; Recommended hybrid mismatch rule for deductible payments made by a hybrid payer; Recommended hybrid mismatch rule for deductible payments by a dual resident
Chapter 4.Arrangements that produce indirect D/NI outcomesRecommended rule for indirect D/NI outcomes; Chapter 5.Implementation; Recommendations on implementation and co-ordination; Chapter 6.Definitions in relation to scope; Definition of structured arrangement; Definition of related person, control group and acting together; Chapter 7.Key terms; Agreed definitions; Part II - Recommendation on treaty issues; Introduction; Chapter 8.Dual-resident entities; Chapter 9.Treaty provision on transparent entities; Chapter 10.Interaction between Part I and tax treaties
Rule providing for the denial of deductionsDefensive rule requiring the inclusion of a payment in ordinary income; Exemption method; Credit method; Potential application of anti-discrimination provisions in the OECD Model Convention
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