Hybrid Mismatch Arrangements - Corporate Tax Statistics

The 2015 BEPS Action 2 Final report and the Branch Mismatch Arrangements Report sets out recommendations to neutralise the effects of hybrid mismatch arrangements that exploit differences in the tax treatment of instruments or entities between jurisdictions. Such arrangements can result in double non-taxation, double deductions or long-term deferral of tax. The Action recommends changes to domestic law and treaty provisions to ensure that payments are either included in the taxable income of the recipient or denied as a deduction to the payer. Recommendations in the branch report aimed to neutralise mismatches arising from differences in the way the branch and head office account for a payment made by or to the branch.The OECD gathers information on progress related to the implementation of Action 2, namely, whether a jurisdiction has hybrid mismatch arrangements in place and, if so, the types of measures in place in the jurisdiction including:

• hybrid financial instrument rules (denial of deduction or inclusion of income where mismatch arises)
• hybrid entity rules (addressing payments by or to hybrid entities, including reverse hybrids)
• imported mismatch rules (neutralising mismatches whose effect is imported into a third jurisdiction)
• dual resident payer rules (denying duplicate deductions where an entity is resident in more than one jurisdiction)
• treaty changes to ensure that benefits are only available where income is fully taxed in at least one jurisdiction
• linking rules that coordinate the tax treatment in the payer and payee jurisdictions
• branch recommendations (e.g. branch payee mismatch rule, deemed branch payment rule, branch double deduction rule)

Contact: CorporateTaxStatistics@OECD.org

Related Document

BEPS Action 2 Final Report
Neutralising the Effects of Branch Mismatch Arrangements, Action 2