On 11 July 2017, the OECD Committee on Fiscal Affairs released the draft contents of the 2017 update to the OECD Model Tax Convention prepared by the Committee’s Working Party. ATOZ, Taxand Luxembourg, dives into the detail.
The update includes the numerous conclusions reached in the various BEPS reports released in October 2015. The update includes the numerous conclusions reached in the various BEPS reports released in October 2015. One of these reports deals with issues of treaty abuse (Action 6 of the BEPS Action Plan) and one of the ways to fight against treaty abuse according to the OECD, is to insert an anti-abuse rule called the Principle Purpose Test (PPT) into tax treaties. The application of the PPT to collective investment vehicles (CIVs) has been subject to many discussions since the start of the BEPS project. Even though in the BEPS Action 6 report conclusions were already reached on how to apply the PPT to CIVs, additional work was needed on the application of the PPT to non-CIVs. Consequently, in March 2016 and January 2017, two discussion drafts were released for comments by industry representatives, their advisers as well as any interested party.
In 2017 update to the OECD Model Tax Convention prepared by the Committee’s Working Party will be submitted for the approval of the Committee on Fiscal Affairs and of the OECD Council later in the course of 2017. This means that, as of today, the draft does not necessarily reflect the final views of the OECD and its member countries. Therefore, it will be necessary to await the release of the final version of the 2017 update in order to have a clear view on the position of non-CIVs in regards to treaty benefits.