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OECD: Update on preferential regimes, zero-tax jurisdictions

OECD: Preferential regimes, zero-tax jurisdictions

The Organisation for Economic Cooperation and Development (OECD) today released a progress report from the “Inclusive Framework” on base erosion and profit shifting (BEPS) that examines 53 preferential tax regimes and demonstrates that the jurisdictions continue to offer tax breaks to only substantive activities and only if they do not pose risks of harmful competition to others.

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As noted in the OECD release, the report is part of ongoing implementation of Action 5 under the BEPS project. The assessments are undertaken by the Forum on Harmful Tax Practices (FHTP), comprising of the more than 120 member jurisdictions of the Inclusive Framework. 

BEPS Action 5 “revamps” the work on harmful tax practices with a focus on improving transparency, including compulsory spontaneous exchange on rulings related to preferential regimes, and on requiring substantial activity for preferential regimes such as intellectual property (IP) regimes. 

The report released today reflects:

  • There are 18 regimes where jurisdictions have delivered on their commitment to make legislative changes to repeal or amend the regime (Andorra, Curaçao, Hong Kong (China), Mauritius, San Marino and Spain).
  • Four new or replacement regimes have been specifically designed to meet BEPS Action 5 standard (Lithuania, Mauritius and San Marino).
  • New commitments to make legislative changes to amend or repeal a further 10 regimes were made by Aruba, Australia, Maldives, Mongolia, Montserrat, the Philippines and Saint Lucia.
  • There are an additional 17 regimes that have been brought into the FHTP review process (Aruba, Brunei Darussalam, Curaçao, Gabon, Greece, Jordan, Kazakhstan, Malaysia, Panama, Paraguay, Saint Kitts and Nevis and the United States).
  • Four other regimes have been found to be out of scope, not yet operational or were already repealed or without harmful features (Aruba, Kenya, Paraguay).

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