The Platform for Collaboration on Tax – a joint initiative of the IMF, OECD, UN and World Bank Group – is consulting on a draft toolkit designed to help developing countries tackle the complexities of taxing offshore indirect transfers (OITs) of assets, after concerns were raised that some multinational corporations use this practice to try to minimise their tax liability
The group says the tax treatment of OITs, which it defines as the sale of an entity located in one country that owns an ‘immovable’ asset located in another country, by a non-resident of the country where the asset is located, has become an increasingly critical tax issue in a globalised world.
However, there is no unifying principle on how to treat these transactions, and the issue was not addressed in the OECD/G20 base erosion and profit shifting (BEPS) project.
The toolkit is designed to set out the principles that should guide the taxation of these transactions in the countries where the underlying assets are located. It emphasises extractive (and other) industries in developing countries, and considers the current standards in the OECD and the UN model tax conventions, and the new multilateral convention.
In addition, the toolkit discusses economic considerations that may guide policy in this area, the types of assets that could appropriately attract tax when transferred indirectly offshore, implementation challenges that countries face, and options which could be used to enforce such a tax.
The initiative forms part of a series the Platform is preparing to help developing countries design their tax policies, and is in keeping with the work being done to increase the capacity of developing countries to apply the OECD/G20 BEPS Project.
The deadline for commenting on the draft toolkit is 25 September. The Platform aims to release the final toolkit by the end of 2017.
The Taxation of Offshore Indirect Transfers – A Toolkit is here.