Panama became a member of the inclusive framework on Base Erosion Profit Shifting (BEPS) on October 31, 2016. In joining this framework, member countries, in coordination with the OECD Committee on Fiscal Affairs (CFA), will confront tax avoidance and improve the coherence of international tax rules on an equal footing, through the development, review, implementation and monitoring of agreed minimum standards in respect of BEPS related issues. All members of the inclusive framework participate in all the meeting of the CFA and its working groups that relate to BEPS.
Minimum standards agreed to be initially implemented by associated countries relate to the following:
- Model provisions to prevent treaty abuse in inappropriate circumstances;
- Standardized country by country reporting that will give Tax Administrations a complete view of where profits and economic activities of a Multinational Entity area conducted, and the ability to use this information to assess transfer pricing and other BEPS issues;
- Peer review process to address harmful tax practices, that will include patent boxes to indicate harmful features and the commitment of the member country to adhere to a mandatory spontaneous exchange of relevant information on a taxpayer specific ruling (e.g. preferential regimes and substantial activities);
- Agreements to secure progress on dispute resolutions through a mutual agreement procedure.
The monitoring process of the above mentioned standards will ensure that all members, as well as jurisdictions of relevance identified as such, will comply with the standards in order to ensure a level playing field. The review mechanism will also include additional procedures for supervision and timing on the implementation of the other elements of the BEPS package, i.e., remaining actions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.