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OECD releases additional guidance on BEPS action 4

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The OECD has released an updated version of the BEPS action 4 report (interest deductions etc), which includes further guidance on: (1) the group ratio rule; and (2) country-specific approaches to risks posed by the banking and insurance sectors.

Further technical detail on the group ratio rule concerns:

  • the calculation of a group's net third party interest expense
  • the calculation of group EBITDA, and
  • approaches to deal with the impact of loss-making entities within a group (i.e. negative EBITDA) on the operation of the rule.

Draft Finance Bill 2017 legislation introducing new restrictions on corporate interest expense deductions covers some of the recommendations in BEPS action 4, although additional provisions are expected by the end of January.

On banking and insurance businesses, the updated report examines the regulatory and commercial aspects which can constrain the ability of a group to use interest for BEPS purposes and examines the limits on such constraints and how any such risks can be addressed.

Draft Finance Bill 2017 legislation proposes making banking and insurance groups subject to corporate interest restriction in the same way as other industry groups, although the government has stated that it will monitor whether there is a need to amend the rules to deal with possible risks arising from 'mixed' groups that combine non-financial services businesses with a regulated bank or insurer.

Issue: 1337
Categories: News , International taxes