BEPS - further consultation on detailed design

In September 2016 and March 2017 the Government released three discussion documents that proposed a comprehensive package of law changes to combat BEPS:

- BEPS – Strengthening our interest limitation rules;
- BEPS – Transfer pricing and permanent establishment avoidance; and
- Addressing hybrid mismatch arrangements.

On 3 August, Ministers announced the Government’s policy decisions on the proposed package of BEPS measures. As part of this announcement the Government proactively released the relevant BEPS Cabinet papers, policy reports and public submissions. For more information see the media statement and background documents.

The key policy decisions are summarised in BEPS – A summary of the key policy decisions.

It is expected that the measures will be included in a BEPS taxation bill to be introduced late this year, for enactment by July 2018. The proposed application date for most of the measures is income years beginning on or after 1 July 2018.

In a number of cases, submitters made a good case for refining the scope of proposals or for consulting further on the technical detail. Ministers have therefore instructed Inland Revenue and the Treasury to carry out further targeted consultation on such matters of technical detail (including draft legislation on some key items).

We intend to consult further on the legislative design for:

- the permanent establishment avoidance rule;
- key items of the transfer pricing rules;
- key items of the hybrid mismatch rules;
- the restricted transfer pricing rule for related-party interest;
- the treatment of deferred tax liabilities in the thin capitalisation rules; and
- the carve-out to the thin capitalisation rules for certain infrastructure investments.

The indicative timeframe for this further consultation process is:

- 4–22 September – consultation on the permanent establishment avoidance rule, transfer pricing and interest limitation rules – this will include stakeholder workshops with interested parties.

- 11–29 September – consultation on the hybrid mismatch rules – this will include stakeholder workshops with interested parties.

Next steps

Stakeholders who would like to be consulted on the technical details can contact [email protected] with “BEPS further consultation” in the subject line.