Assignment Module 3 - BEPS project Action 4
However, for banking and insurance
entities in the groups, the July 2016 discussion draft recommends no single
approach but provides that countries should introduce their own rules to tackle the
actual BEPS risks they face. Unfortunately, this will add to the complexity of interest
expense deductibility rules the companies face and tax administrators need to take
into account. The comments to this discussion draft are expected by September 8 th,
201t6.
In summary, the OECD has done a thorough preparation to address the challenges
under Action 4 of their BEPS project. Some lines of work are still in the discussion
phase but a proposal for a fixed ratio rule supplemented with group ratio rule to
limit allowed tax deductions to a fixed net interest expense/EBITDA ratio is a
promising way forward. Even with its drawbacks and potential for countries to opt
out from applying these new rules to their full effect, the possibilities for
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