OECD Releases Discussion Draft on BEPS Action 2 Branch Mismatch Structures

On 22 August 2016, the OECD released a discussion draft (the draft) on branch mismatch structures under Action 2 of the Action Plan on Base Erosion and Profit Shifting (AP-BEPS). The mismatches include the following:

• deduction/no inclusion (D/NI) outcomes where the payment is deductible under the rules of the payer jurisdiction but not included in the ordinary income of the payee;
• double deduction (DD) outcomes where the payment triggers two deductions in respect of the same payment; and
• indirect deduction/no inclusion (indirect D/NI) outcomes where the income from a deductible payment is set off by the payee against a deduction under a hybrid mismatch arrangement.

The draft applies the analysis and recommendations of Action 2 to mismatches that may arise through the use of branch structures. The document is available here: http://www.oecd.org/tax/beps/Discussion-draft-Action-2-Branch-mismatch-structures.pdf

The OECD invites interested parties to submit their comments by 19 September 2016. The comments should be sent by email to aggressivetaxplanning@oecd.org and be addressed to the International Co-operation and Tax Administration Division, OECD/CTPA.