Base Erosion and Profit Shifting (‘BEPS’)

Taxsutra Conclave

October 2015

The Big Picture

• The BEPS project – initial reactions

• BEPS & the Source v. Residence debate

• Developing country concerns – how far addressed in BEPS?

• Do the final measures meet India’s policy objectives?

Important Issues

• Digital Economy: are recommended changes to the PE standard, CFC Rules and TP Rules enough? Impact of non-adoption of recommendations on virtual PE,

withholding on digital payments & equalisation levy

• Overlap between CFC Rules and the Rules aligning TP outcomes with value creation

• Principal Purposes Test v. Specific LOB – impact on certainty?• Aligning TP outcomes with value creation:

Contractual terms v. conduct: Substance over form? Guidance on profit split- will tax authorities agree? Legal ownership v. economic ownership of intangibles

Implementation

• Time-frame estimate for full implementation

• Self-enforcement through judicial anti-avoidance rules?

• Prospects of the Multilateral treaty – can a consensus be evolved?

Will a lack of meaningful participation doom the BEPS measures?

Impact

• Overall impact on Existing cross-border structures

Certainty and litigation risks

Compliance costs

Developing countries

• Will a GAAR still be relevant in a treaty context?

• Interplay between existing LOBs in India’s treaties and proposed LOB in multilateral treaties

• Life in a post-BEPS era – is cross-border tax planning dead?

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