Hybrid Entities in Tax Treaty Law

S. 4901. Introduction

Development of new information and communication technologies changed all of the spheres of world socio-economic development penetrating business, society, and government activities. On the one hand, the use of ICT has made the work of tax administrations easier, helping execution of tax collection and control functions as well as making public services available for better compliance. On the other hand, digitalization of the economy gave rise to new businesses that do not require a physical presence in the jurisdictions where they actually operate and derive business profits. The use of structures that allow digital multinational enterprises to minimize tax obligations forced the OECD and national legislators to develop appropriate measures. It resulted in gradual implementation of proposals of the BEPS Action Plan that, however, has left a number of tax issues related to exploitation of particularities of the digitalized economy for further consideration.

The issues not resolved by the BEPS Project required the OECD and tax administrations to create a new set of coordinated measures to address the challenges arising from the digitalization of the economy as well oth...