Comments on the O.E.C.D.’s public discussion draft to the follow-up work on B.E.P.S. Action 6 (the “Follow-Up Draft”) were released on January 12, 2015. Action 6 of the B.E.P.S. Action Plan focuses on preventing treaty abuse and treaty shopping, which the O.E.C.D. has identified as being one of the most important sources of B.E.P.S. concerns.
The Follow-Up Draft modifies the “Report on Action 6 (Prevent the granting of treaty benefits in appropriate circumstances)” and identifies 20 issues on which interested parties may provide comments. It focuses on matters related to the application of the limitation on benefits (“L.O.B.”) rule and principal purpose test (“P.P.T.”) as well as the treaty entitlement of collective investment vehicles (“C.I.V.’s”) and non-C.I.V. funds. The 20 issues identified by the Follow-Up Draft and addressed in the comments are as follows:
Issues Related to the L.O.B. Provision
- C.I.V.’s: application of the L.O.B. and treaty entitlement,
- Non-C.I.V. funds: application of the L.O.B. and treaty entitlement,
- Commentary on the discretionary relief provision of the L.O.B. rule,
- Alternative L.O.B. provisions for E.U. countries,
- Requirement that each intermediate owner be a resident of either Contracting State,
- Issues related to the derivative benefit provision,
- Provisions dealing with “dual-listed company arrangements,”
- Timing issues related to the various provisions of the L.O.B. rule,
- Conditions for the application of the provision on publicly-listed entities, and
- Clarification of the “active business” provision.