Although probably most of the BEPS Action Plan proposals require implementation through enacted legislation, a substantive part of these proposals is just designed to shed more light on how to apply existing law. Such proposals are ready for immediate application. This is notably true for the revision of the OECD Transfer Pricing Guidelines (TPG). These guidelines reflect the harmonized view of OECD Countries on how they interpret the arm’s length principle of Art 9 of the OECD Model Convention contained in their bilateral tax treaties, as well.

The interpretation of tax treaties is governed by the general interpretation rules of the Vienna Convention of the Law of Treaties (VCLT). One of these rules requires that the subsequent practice of treaty parties concerning the interpretation of their treaties has to be taken into account. The general agreement of OECD member states on the BEPS revision of the OECD TPG reflects the practice of their governments and tax administrations on how they understand and apply the arm’s length principle in their tax treaties. By virtue of the VCLT, the contracting states (i.e. not only their governments, but also their courts) are legally bound to ta...