On 27 July 2017, the OECD released the report on Neutralising the Effects of Branch Mismatch Arrangements (BEPS Action 2).
This report sets out recommendations for branch mismatch rules that would bring the treatment of these structures into line with the treatment of hybrid mismatch arrangements as set out in the 2015 Report on Neutralising the Effects of Hybrids Mismatch Arrangements (Action 2 Report). Branch mismatches arise where the ordinary rules for allocating income and expenditure between the branch and head office result in a portion of the net income of the taxpayer escaping the charge to taxation in both the branch and residence jurisdiction. Unlike hybrid mismatches, which result from conflicts in the legal treatment of entities or instruments, branch mismatches are the result of differences in the way the branch and head office account for a payment made by or to the branch.
Last year the OECD released a discussion draft in this respect and invited interested parties to provide comments.
Further insights in the report and the implications for your organisation will follow. In the meantime, please contact your local PwC contact or Evi Geerts, Pieter Deré or Maarten Temmerman for any questions.