The IMF, OECD, UN and World Bank Group released a draft toolkit designed to help developing countries tackle the complexities of taxing offshore indirect transfers of assets. Public feedback on practice of multinational corporations to minimize their tax liability is sought by the Platform for Collaboration on Tax.
Offshore indirect transfers (OITs) refer to the sale of an entity located in one country, and this entity owns an "immovable" asset located in another country, in which case the seller is a non-resident of the country where the asset is located. Tax treatment of transactions as such has raised significant concern in many developing countries. However, this is not dealt in the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project. The toolkit is a response to the Development Working Group of the G20, and the intension of the Platform is to help developing countries design their tax policies in case these countries are less capable to administer their tax systems.
This draft toolkit discussed the current standards in the OECD and the U.N. Model Tax Convention, and the new Multilateral Convention. The connotation of revenue of immovable assets are suggested to be extended, in particular regarding extractive industries in developing countries. The definition of immovable property is also redefined broadly. Two optional models on offshore indirect transfers taxation are provided by the draft: to tax the local resident asset-owning entity under a deemed disposal model, where the tax duty occurs if there is a sufficient change in the ownership of the entity; or to tax the non-resident seller alternatively, which may be supplemented with taxable asset rules. All interested stakeholders on this draft are inquired for comments by September 25, 2017 from questions provided by the OECD including, but not limiting to:
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