OECD/G20 Base Erosion and Profit Shifting Project

2313-2612 (online)
2313-2604 (print)
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Addressing base erosion and profit shifting is a key priority of governments around the globe. In 2013, OECD and G20 countries, working together on an equal footing, adopted a 15-point Action Plan to address BEPS. Beyond securing revenues by realigning taxation with economic activities and value creation, the OECD/G20 BEPS Project aims to create a single set of consensus-based international tax rules to address BEPS, and hence to protect tax bases while offering increased certainty and predictability to taxpayers. In 2016, the OECD and G20 established an Inclusive Framework on BEPS to allow interested countries and jurisdictions to work with OECD and G20 members to develop standards on BEPS related issues and reviewing and monitoring the implementation of the whole BEPS Package. Over 100 countries and jurisdictions have joined the Inclusive Framework.


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Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4 - 2015 Final Report

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05 Oct 2015
9789264241176 (PDF) ;9789264241169(print)

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The mobility and fungibility of money makes it possible for multinational groups to achieve favourable tax results by adjusting the amount of debt in a group entity. The recommended approach ensures that an entity’s net interest deductions are directly linked to its level of economic activity, based on taxable earnings before deducting net interest expense, depreciation and amortisation (EBITDA). This approach includes three parts: a fixed ratio rule based on a benchmark net interest/EBITDA ratio; a group ratio rule which allows an entity to deduct more interest expense in certain circumstances based on the position of its worldwide group; and targeted rules to address specific risks. A country may choose not to introduce the group ratio rule, but in this case it should apply the fixed ratio rule to multinational and domestic groups without improper discrimination.

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Table of Contents


Chapter 1. Recommendations for a best practice approach

Chapter 2. Interest and payments economically equivalent to interest

Chapter 3. Who a best practice approach should apply to

Chapter 4. Applying a best practice approach based on the level of interest expense or debt

Chapter 5. Measuring economic activity using earnings or asset values

Chapter 6. Fixed ratio rule

Chapter 7. Group ratio rule

Chapter 8. Addressing volatility and double taxation

Chapter 9. Targeted rules

Chapter 10. Applying the best practice approach to banking and insurance groups

Chapter 11. Implementing the best practice approach

Annex A. European Union law issues

Annex B. Data on companies affected by a benchmark fixed ratio at different levels

Annex C. The equity escape rule

Annex D. Examples

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