The Organisation for Economic Co-operation and Development (“OECD”) has issued its fourth annual progress report of the OECD/G20 Inclusive Framework on BEPS, which describes the progress made to deliver on the mandate of the Framework, covering the period from July 2019 to July 2020.
The progress report comprises four parts of substantive content:-
Part I – Inclusivity and support for developing countries
Part II – Strengthening coherence
Part III – Substance
Part IV – Evaluation, transparency and tax certainty.
The parts cover the review of the BEPS minimum standards, specifically Articles 5 to 8 and 12 to 14, and progress of their implementation.
With respect to the two pillars of proposals made by OECD/G20 Inclusive Framework members (i.e., Pillar 1 – nexus and profit allocation and Pillar 2 – minimum level of taxation), the OECD/G20 Inclusive Framework agreed to a Programme of Work (“PoW”) in May 2019 to provide guidance on a path forward to achieve a multilateral, consensus-based solution. For Pillar 1, the OECD Secretariat developed its “Unified Approach”, which built on the commonalities identified in the PoW and was released for public comment in October 2019. For Pillar 2, a public consultation was held in December 2019.
To Address the “Tax Challenges Arising from the Digitalisation of the Economy”, the OECD/G20 Inclusive Framework approved the “Statement by the OECD/G20 Inclusive Framework on BEPS on the Two Pillar Approach in January 2020. The Statement included an “Outline of the Architecture of a Unified Approach on Pillar One” note and an updated PoW. A progress note on Pillar 2 was also agreed.
Further reform is underway and the results from the ongoing 2020 BEPS minimum standards reviews will allow for a complete stock-take in 2021. Taxpayers should continue to pay close attention to the development progress of the framework and ensure their readiness for the international tax rules of the 21st century.
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