A beneficial ownership toolkit was released 20. May 2019 in the context of the OECD’s Global Integrity and Anti-Corruption Forum. The toolkit, prepared by the Secretariat of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes in partnership with the Inter-American Development Bank, is intended to help governments implement the Global Forum’s standards on ensuring that law enforcement officials have access to reliable information on who the ultimate beneficial owners are behind a company or other legal entity so that criminals can no longer hide their illicit activities behind opaque legal structures. The toolkit was developed to support Global Forum members and in particular developing countries because the current beneficial ownership standard does not provide a specific method for implementing it. The toolkit covers a variety of important issues regarding beneficial ownership, including: the concepts of beneficial owners and ownership, the criteria used to identify them, the importance of the matter for transparency in the financial and non-financial sectors; technical aspects of beneficial ownership requirements, distinguishing between legal persons and legal arrangements (such as trusts), and measures being taken internationally to ensure the availability of information on beneficial ownership a series of checklists that may be useful in pursuing a specific beneficial ownership framework; ways in which the principles on beneficial ownership can play out in practice in Global Forum EOIR peer reviews; why beneficial ownership information is also a crucial component of the automatic exchange of information regimes being adopted by jurisdictions around the world. beneficial-ownership-toolkit ...

Like other sectors of the economy, there are base erosion and profit shifting risks in the mining sector. Based on the ongoing work on BEPS, the IGF (Intergovernmental Forum on Mining) and OECD has released guidance for source countries on transfer pricing in the mining sector. The transfer pricing and tax avoidance issues identified in the sector are: 1. Excessive Interest Deductions Companies may use related-party debt to shift profit offshore via excessive interest payments to related entities. “Debt shifting” is not unique to mining, but it is particularly significant for mining projects that require high levels of capital investment not directly obtainable from third parties, making substantial related-party borrowing a frequent practice. 2. Abusive Transfer Pricing Transfer pricing occurs when one company sells a good or service to another related company. Because these transactions are internal, they are not subject to market pricing and can be used by multinationals to shift profits to low-tax jurisdictions. Related-party transactions in mining can be broadly grouped into two categories: (1) the sale of minerals and/or mineral rights to related parties; and (2) the purchase or acquisition of various goods, services and assets from related parties. Developing countries require sector-specific expertise to detect and mitigate transfer mispricing in the mining sector. 3. Undervaluation of Mineral Exports Profit shifting via the pricing of mineral products sold to related parties is a major concern for many mineral exporting countries. For developing countries, these risks are elevated where government agencies lack the mineral-testing facilities required to verify the grade and quality of mineral exports, as well as detailed sector-specific knowledge of the mining transformation process and mineral product pricing. 4. Harmfull Tax Incentives Mining and exploration tax incentives are common in developing countries. While tax incentives could encourage expansion of the sector, they may also lead to excess transfers of the gains from countries. It is unrealistic to expect that developing countries will forego incentives entirely due to the pressures of attracting investment. However, it is important that countries understand when tax incentives may be appropriate, how companies are likely to respond to incentives, and the distinction between tax incentives that permanently reduce taxes and from provisions affecting timing impacts. 5. Tax Stabilisation Clauses Fiscal stabilization clauses are problematic from a tax perspective because they can freeze the fiscal terms in the contract such that changes in tax law may not be applicable to existing mines, foregoing significant government revenue. 6. International Tax Treaties Developing countries consistently raise concerns about tax treaty abuse. Countries with abundant mineral resources need particular assistance in this area, considering how treaty provisions might have a significant impact on taxes imposed on the mining sector. 7. Offshore Indirect Transfers of Mining Assets Transfers of ownership of company assets (or the companies themselves) can generate significant income, which many countries seek to tax as capital gains. Transactions may be structured to fall outside the mining country’s tax base by selling shares in an offshore company holding the asset, without notifying tax authorities in the country where the asset/company is located. 8. Metals Streaming Metals streaming involves mining companies selling a certain percentage of their production at a fixed cost to a financier in return for funds for partial or complete mine development and construction. Since the amount of financing provided is linked to the discounted mineral price, companies have strong incentives to agree to lower fixed prices to increase the up-front finance available. Streaming reduces the tax base of resource-producing countries, where royalties and income tax use sales revenue as part of calculations. There is virtually no guidance on these arrangements in the mining tax literature. 9. Abusive Hedging Arrangements Hedging is a legitimate business practice in many commodity markets. It consists of locking in a future-selling price in order for both parties to the transaction to plan their commercial operations with predictability. A problem arises when companies engage in abusive hedging with related parties. They use hedging contracts to set an artificially low sale price for production and therefore record systematic hedging losses, reducing their taxable income. 10. Inadequate Ring-Fencing It is possible that mining companies will have multiple activities within a country, creating opportunities to use losses incurred in one project (e.g., during exploration for a new mine), to offset profits earned in another project, thereby delaying payment of corporate income tax. Ring-fencing is one way of limiting income consolidation for tax purposes; however, getting the design right is critical to securing tax revenues while attracting further investment. The following reports adresses some of these issues: Limiting the impact of Excessive Interest Deductions on Mining Revenue Tax incentives in Mining: Minimising risk to Revenue Comparables Data for Transfer Pricing Analyses – Prices of Minerals Sold in an Intermediate Form Toolkit for Transfer Pricing Risk Assessment in the African Mining Industry Transfer Pricing Cases in Mining and Commodity Case NameDescriptionDateCourtCatagoriesKeywords ...

A new report from the OECD contains guidance for tax administration on the application of the approach to hard-to-value intangibles (HTVI), under BEPS Action 8. This new guidance present the principles that should underlie the application of the HTVI approach by tax administration, with the aim of improving consistency and reduce the risk of economic double taxation. The new guidance also includes a number of examples clarifying the application of the HTVI approach in different scenarios; and addresses the interaction between the HTVI approach and the access to the mutual agreement procedure under the applicable tax treaty. guidance-for-tax-administrations-on-the-application-of-the-approach-to-hard-to-value-intangibles-BEPS-action-8 ...

June 2018 the OECD released revised guidance on the profit split method. The new guidance will be incorporated into the OECD Transfer Pricing Guidelines, replacing the previous text on the transactional profit split method in Chapter II. The revised guidance retains the basic premise that the profit split method should be applied where it is found to be the most appropriate method to the case at hand, but it significantly expands the guidance available to help determine when that may be the case. It also contains more guidance on how to apply the method, as well as numerous examples. revised-guidance-on-the-application-of-the-transactional-profit-split-method-beps-action-10 ...

The OECD has released additional guidance on the attribution of profits to permanent establishments. This additional guidance sets out high-level general principles for the attribution of profits to permanent establishments arising under Article 5(5), in accordance with applicable treaty provisions, and includes examples of a commissionnaire structure for the sale of goods, an online advertising sales structure, and a procurement structure. It also includes additional guidance related to permanent establishments created as a result of the changes to Article 5(4), and provides an example on the attribution of profits to permanent establishments arising from the anti-fragmentation rule included in Article 5(4.1). See also the 2008 Guidance and 2010 Guidance. additional-guidance-attribution-of-profits-to-permanent-establishments-BEPS-action-7 ...

OECD Transfer Pricing Guidelines 2017 – New version The OECD Transfer Pricing Guidelines for Multinational Enterprise and Tax Administrations provide guidance on the application of the “arm’s length principle”, which is the international consensus on transfer pricing, i.e. on the valuation for tax purposes of cross-border transactions between associated enterprises. In a global economy where multinational enterprises (MNEs) play a prominent role, transfer pricing continues to be high on the agenda of tax administrations and taxpayers alike. Governments need to ensure that the taxable profits of MNEs are not artificially shifted out of their jurisdiction and that the tax base reported by MNEs in their country reflects the economic activity undertaken therein. For taxpayers, it is essential to limit the risks of economic double taxation that may result from a dispute between two countries on the determination of the arm’s length remuneration for their cross-border transactions with associated enterprises ...