19/04/23

INTERNATIONAL TAX: OECD releases fifth peer-review report on BEPS minimum standard.

As published on step.org/industry-news, Wednesday 19 April, 2023.

The OECD has now released its fifth annual peer-review report examining how countries are addressing base erosion and profit-shifting (BEPS). It includes reports on 11 Latin American countries.

The report particularly focuses on the implementation of the Action 6 minimum standard relating to the prevention of treaty abuse under the OECD/G20 BEPS Project. The Latin American countries that are part of the OECD Inclusive Framework on BEPS are: Argentina, Brazil, Chile, Colombia, Costa Rica, Honduras, Mexico, Panama, Paraguay, Peru and Uruguay.

The report notes that four of Argentina’s 21 tax agreements comply with the OECD minimum standard. Any agreements modified by the country’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) will come into compliance with the minimum requirement when the MLI comes into force.

Similarly, the OECD reports that three of Colombia’s 13 agreements, three of Mexico’s 60 agreements and one of Peru’s nine agreements comply with the minimum standard.

These countries are all implementing MLIs that will bring their other tax agreements into line with the standard. None of Costa Rica’s four tax agreements comply with the OECD standard, but it has signed the MLI. The OECD’s peer-review report has therefore recommended that these countries complete the necessary steps for the MLI to come into force as soon as possible.

Twenty-two of Chile’s 33 tax agreements are in line with the minimum standard and its MLI came into force in 2021. Panama’s MLI also came into force in 2021 and 12 of its 17 agreements are currently in line with OECD standards. Sixteen of Uruguay’s 23 tax agreements comply with the minimum standard and its MLI came into force from 2020. Any agreements modified by the MLI in these countries will therefore come into compliance with the minimum standard as soon as the provisions of the MLI take effect.

Brazil has not signed the MLI, but the report notes that four of its 36 tax agreements comply with the minimum standard and it is taking steps to implement the standard with a further 28 of its agreements.

Honduras currently has no tax agreements in place, but no concerns have been raised by other jurisdictions or the OECD peer-review. The report notes that Paraguay is consulting with the BEPS Project secretariat on a plan that will implement the minimum standard in some of its tax agreements.