Base erosion and profit shifting

OECD releases additional guidance on the attribution of profits to a permanent establishment under BEPS Action 7


22/03/2018 – Today, the OECD released the report Additional Guidance on the Attribution of Profits to Permanent Establishments (BEPS Action 7).

In October 2015, as part of the final BEPS package, the OECD/G20 published the report on Preventing the Artificial Avoidance of Permanent Establishment Status. The Report recommended changes to the definition of permanent establishment (PE) in Article 5 of the OECD Model Tax Convention, which is crucial in determining whether a non-resident enterprise must pay income tax in another State. In particular, the Report recommended changes aimed at preventing the use of certain common tax avoidance strategies that have been used to circumvent the existing PE definition.

The Report also mandated the development of additional guidance on how the existing rules on attribution of profits to PEs under Article 7 would apply to PEs resulting from the changes recommended in the Report (in particular for PEs outside the financial sector), taking into account the revised guidance contained in the Report on Aligning Transfer Pricing Outcomes with Value Creation (Actions 8-10 Report, OECD 2015). The additional guidance resulting from this mandate sets out high-level general principles, which countries agree are relevant and applicable in attributing profits to PEs in accordance with applicable treaty provisions. It also provides examples on the attribution of profits to certain types of PEs arising from the changes to the PE definition under BEPS Action 7.

Addressing base erosion and profit shifting continues to be a key priority of governments around the globe. In 2013, OECD and G20 countries, working together on an equal footing, adopted a 15-point Action Plan to address BEPS. In 2015, the BEPS package of measures was endorsed by G20 Leaders and the OECD. In order to ensure the effective and consistent implementation of the BEPS measures, the Inclusive Framework on BEPS was established in 2016 and now has 113 members. It brings together all interested countries and jurisdictions on an equal footing at the OECD Committee on Fiscal Affairs.

Find out more about the Inclusive Framework on BEPS:

Media queries should be directed to Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration (+33 6 26 30 49 23) or Jefferson VanderWolk, Head of the Tax Treaties and Transfer Pricing Division (+33  1 45 24 94 90).


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