Limiting Base Erosion

S. 4881. Overview

Recently, much emphasis has been placed on the absence of a connection between intellectual property income and business activities in cases where multinational companies are able to shift ownership of their intellectual property to low-tax jurisdictions, as well as on the separation of risks from the returns associated with such risks in intercompany contracts. This trend has been introduced to take advantage of low-tax jurisdictions and is an outcome of the lack of regulations and indications in place for the treatment of transactions involving intangibles.

The scope of this paper is to provide an explanation of how the OECD and G20 have made up for the historical lack of guidance with the introduction of new recommendations, in particular with the final Base Erosion and Profit Shifting (BEPS) Actions 8–10, and to discuss from a tax perspective the key implications of the Actions for multinational groups.

2. Introduction

As an introduction to the topic, it is useful to provide a brief description of the importance of the “ownership” of intangible concept in today’s market and how in the recent evolution of the OECD projects this topic has been addressed.

2.1. Importance of...