In November 2015, Prime Minister Justin Trudeau and the other G20 leaders endorsed the OECD’s package of measures released as part of the base erosion and profit shifting (BEPS) project. The BEPS project, an ambitious plan undertaken jointly by the OECD and G20 to overhaul the global international tax system, culminated in hundreds of pages of recommendations that, if adopted, could have a significant impact on cross-border trade and the competitiveness of Canadian businesses.
In 2019, the OECD published its Programme of Work [PDF] to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalization of the Economy (Program of Work). This Program of Work intends to lead to a global consensus on revisions to the international tax system in an effort to prevent countries from imposing unilateral measures to tax the income of multinationals (particularly those operating highly digitized businesses). The OECD’s Program of Work contains two principal measures: Pillar One, which would allocate additional taxing rights to market jurisdictions (such as by revising the “permanent establishment” nexus for establishing source country taxing rights and revising the “arm’s length” standard for allocating profits), and Pillar Two, which would introduce a global minimum tax to prevent the shifting of profits to low-tax jurisdictions. This Program of Work was endorsed by Canada and other G20 countries and, if adopted globally, will mark a fundamental overhaul of the entire international tax system and could significantly increase taxes and administrative costs of multinational enterprises.
Lawyers in Osler’s leading Tax Group are experts on the complexities of international taxation and understand the challenges of a rapidly changing global economy. Here they offer timely insight into global tax reforms and the ongoing developments of the OECD/G20 BEPS Action Plan.
As the Action Plan unfolds, Osler will continue to provide updates on the impact of the plan initiatives. Continue to visit this page for useful information.
BEPS Actions Implementation - Canada
Please click on Pillar One or Pillar Two below to access additional information and related resources.
Pillar One – Unified Approach
Summary
Pillar One intends to address certain perceived base erosion and profit shifting issues by introducing a co‑ordinated set of new domestic rules and tax treaty changes that would result in the allocation of additional taxing rights to market jurisdictions. See also "Action Item 1: Digital Economy."
Selected Resources
Pillar Two – GloBE Proposal
Summary
Pillar Two intends to address certain perceived base erosion and profit shifting issues by introducing a co‑ordinated set of new domestic rules and tax treaty changes that would result in a global minimum tax. See also "Action Item 1: Digital Economy."
Selected Resources
This chart is an overview of the 15 action items, outputs and resources that we have curated to provide you with detailed information for each action item. Click on an action item below to access the information.
Action Item 2: Hybrids
Summary
Neutralising the Effects of Hybrid Mismatch Arrangements: model treaty provisions and recommendations regarding the design of domestic rules to neutralise the effects of hybrid instruments and entities (e.g. double non-taxation, double deduction, long-term deferral)
Output
Domestic Law/Model
Selected Resources
Action Item 3: CFC Rules
Selected Resources
Controlled Foreign Company Rules (CFC Rules)
Summary
Designing Effective Controlled Foreign Company Rules – recommendations to strengthen rules of CFC’s.
Output
Domestic Law
Selected Resources
Action Item 4: Interest Deductions
Summary
Limiting Base Erosion Involving Interest Deductions and Other Financial Payments – common approaches based on best practices for preventing base erosion through the use of interest expense.
Output
Domestic Law/TPG
Selected Resources
Action Item 5: Harmful Tax Practices
Summary
Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance – revamps the work on harmful tax practices with a focus on improving transparency, including compulsory spontaneous exchange on rulings related to preferential regimes, and on requiring substantial activity for preferential regimes, such as IP regimes.
Output
Identify OECD/ Non- OECD and Revise Criteria
Selected Resources
Action Item 6: Treaty Abuse
Summary
Preventing the Granting of Treaty Benefits in Inappropriate Circumstances – model treaty provisions and recommendations regarding the design of domestic rules to prevent treaty abuse.
Output
Domestic Law/Model
Selected Resources
Action Item 7: Permanent Establishment Status
Summary
Preventing the artificial avoidance of Permanent Establishment Status – changes to the definition of permanent establishment to prevent its artificial circonvention. e.g. via the use of commissionaire structures and the likes.
Output
Model
Selected Resources
Action Item 8-10: Transfer Pricing
Summary
Aligning Transfer Pricing Outcomes with Value Creation – Guidance to assure that transfer pricing outcomes are in line with value creation in relation to intangibles, including hard-to-value ones, to risk and capital, and to other high- risks transactions.
Output
TPG/Model
Selected Resources
Osler is ideally positioned to assist clients facing the seismic shift in the application of transfer pricing rules in Canada and around the world. Read more
Action Item 11: BEPS data analysis
Summary
Measuring and Monitoring BEPS – Methodologies to collect and analyse data on BEPS and the actions to address it.
Output
Recommendations/TPG
Selected Resources
Action Item 13: Transfer Pricing Documentation
Summary
Transfer Pricing Documentation and Country–by–country Reporting- revised guidance on transfer pricing documentation, including the template for country-by-country reporting, to enhance transparency while taking into consideration compliance costs.
Output
Recommendations/TPG
Selected Resources
Osler is ideally positioned to assist clients facing the seismic shift in the application of transfer pricing rules in Canada and around the world. Read more
Action Item 14: Dispute Resolution
Summary
Making Dispute Resolutions Mechanisms More Effective – solutions to address obstacles that prevent countries from solving treaty-related disputes under MAP, as well as arbitration.
Output
Model
Selected Resources
Action Item 15: Multilateral Instrument
Summary
Developing Multilateral Instrument to Modify Bilateral Tax Treaties – analyse of the legal issues related to the development of multilateral instrument to enable countries to streamline the implementation of the BEPS treaty measures, as well as the mandate to carry out that work.
Output
New Treaty
Selected Resources
Resources
Fall Economic Statement 2022
Osler – November, 2021
The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, tabled the Fall Economic Statement 2022 on November 3, 2022. The Statement includes an announcement of the government’s intention to introduce a new share buyback tax and additional details on certain investment tax credits proposed in Budget 2022. The Statement also provides general economic and fiscal information and projections, as well as brief updates on some previously announced tax measures and international tax reform.
Tax planning developments: Important international tax changes
Osler Legal Year in Review 2021 – December, 2021
In 2021, a number of significant changes were proposed for international taxation in Canada. As Canada and the rest of the world look to reshape the international tax system, there will be many new challenges (and potential planning opportunities) for multinational enterprises. Tax planning developments: Important international tax changes - Legal Year in Review 2021
Market reactions of multinationals to the OECD BEPS
SSRN – June 10, 2021
This paper looks at the reactions of multinationals in 36 OECD member states. Significant differences were found in the reactions of U.S. companies compared to European Union corporations. Market reactions of multinationals to the OECD BEPS Action Plan by Matthias Petutschnig, Kristin Resenig