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OECD: Guidance on spontaneous exchange by no-tax, nominal-tax jurisdictions

OECD: Guidance on spontaneous exchange

The Organisation for Economic Cooperation and Development (OECD) today issued a release concerning a new “substantial activities standard” for no-tax or nominal-tax jurisdictions. The new standard requires these jurisdictions to spontaneously exchange information on the activities of certain resident entities with the jurisdiction(s) where the immediate parent, the ultimate parent, and/or the beneficial owners are resident.


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According to the OECD release, this exchange of information will allow the tax authorities of these jurisdictions to assess the substance and the activities of the entities resident in no or only nominal tax jurisdictions.

As part of the base erosion and profit shifting (BEPS) Action 5 to address harmful tax practices, jurisdictions may only maintain preferential regimes if certain "substantial activities" requirements are met. To provide a level playing field, these requirements must also apply to jurisdictions with zero or only nominal tax rates. As a result, the Inclusive Framework on BEPS decided in November 2018 to resume the application of the substantial activities requirement for no-tax or only nominal-tax jurisdictions. Thus, substantial activities must be performed in respect of the same types of mobile business activities—regardless whether they take place in a preferential regime or in a no-tax or only nominal-tax jurisdiction.

The new substantial activities standard [PDF 992 KB] requires such no-tax or nominal-tax jurisdictions to engage in spontaneous exchange information on the activities of certain resident entities. So that these spontaneous exchanges take place in a coordinated and efficient manner, today’s guidance sets out the practical modalities regarding the exchange of information requirements under the substantial activities standard. The guidance concerns the timelines for the exchanges, the international legal framework, and clarifications on the key definitions so that jurisdictions receive coherent and reliable information on the activities of the entities in no-tax or only nominal-tax jurisdictions and their owners. The guidance also contains a standardised IT-format for the spontaneous exchanges. It is expected that exchanges pursuant to the standard will commence in 2020.

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