• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 3/19/2014

OECD - Discussion draft on neutralizing hybrid mismatch arrangements (BEPS) 

March 19: The Organisation for Economic Co-operation and Development (OECD) today released two discussion drafts on Action Item 2 (Neutralise the effects of hybrid mismatch arrangements) of the BEPS Action Plan.

According to today’s OECD release, the OECD’s Committee on Fiscal Affairs (CFA) released two consultation documents on Action Item 2 as a single proposal for public consultation:

  • The first discussion draft [PDF 505 KB]—Neutralise the effects of Hybrid Mismatch Arrangements – Recommendations for Domestic Laws—sets out recommendations for domestic rules to neutralise the effect of hybrid mismatch arrangements.
  • The second discussion draft [PDF 356 KB]—Neutralise the effects of Hybrid Mismatch Arrangements - Treaty Aspects of the Work on Action 2 of the BEPS Action Plan—discusses the impact of the OECD Model Convention on those rules and sets out recommendations for further changes to the OECD model treaty to clarify the treatment of hybrid entities.

Read a March 2014 report prepared by the KPMG member firm in the Netherlands.

Comments are due on or before 2 May 2014.

The OECD release states that the recommendations set out in today’s discussion drafts do not represent the consensus views of the CFA or its subsidiary bodies and are intended to provide stakeholders with substantive proposals for analysis and comment.


In July 2013, the OECD published the BEPS Action Plan, identifying 15 actions to address BEPS in a comprehensive manner and establishing deadlines to implement these actions.

Action 2 of the BEPS Action Plan calls for the development of model treaty provisions and recommendations for the design of domestic rules to neutralize the effect of hybrid mismatch arrangements.

The work on Action Item 2 will be coordinated with the BEPS-related work on interest expense deduction limitations, on CFC rules, and on treaty shopping. The Action Plan calls for this work to be concluded by September 2014.

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.


Share this

Share this


Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)

Already a Subscriber? Login

Not a member? Subscribe now