As the BEPS Commission develops a regulatory framework for implementing the BEPS Action Plan, taxpayers should monitor the issuance of regulations that might affect them.

On August 11, 2016, the Costa Rican tax authorities established a Base Erosion and Profit Shifting (BEPS) Commission (the Commission) to work on a domestic regulatory framework to implement the BEPS Action Plan.

Background

In October 2015, the Organisation for Economic Co-operation and Development (OECD) released final reports on all 15 focus areas in its Action Plan on BEPS.¹

To implement the actions efficiently and coherently, the OECD promoted an inclusive framework to which all interested jurisdictions were invited to participate.

The jurisdictions wishing to join this inclusive framework will participate as BEPS Associates in the Committee of Fiscal Affairs (CFA) of the OECD² and its auxiliary entities, on equal terms. This implies that all members of the inclusive framework will have a chance to intervene on equal terms in all of CFA's meetings and its work teams regarding the BEPS project.

The first meeting of the inclusive framework took place on June 30 and July 1, 2016, in which the official member list was made public. The list consists of 82 jurisdictions and includes Costa Rica.

All member jurisdictions of the inclusive framework have committed to implement the four minimum BEPS standards, which consist of the following:

1. Harmful tax practices (Action 5)

The report on Action 5, Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, covers two main areas: (i) defining a "substantial activity" criterion to apply when determining whether tax regimes are harmful; and (ii) improving transparency.

2. Treaty abuse (Action 6)

The report on Action 6, Preventing the Granting of Treaty Benefits in Inappropriate Circumstances, contains changes to the OECD Model Tax Convention and related changes to the Model Commentary to address the inappropriate granting of treaty benefits and other potential treaty abuse scenarios.

3. Country-by-country reporting (Action 13)

The report on Action 13, Transfer Pricing Documentation and Country-by-Country Reporting, sets out a standardized approach to transfer pricing documentation and country-by-country reporting.

4. Dispute resolution (Action 14)

The report on Action 14, Making Dispute Resolution Mechanisms More Effective, reflects the commitment of participating countries to implement substantial changes in their approach to dispute resolution. The report contains measures aimed at strengthening the effectiveness and efficiency of the mutual agreement procedure mechanism, such as specific actions to be taken by countries, suggested changes to legislation and administrative practices, and changes to the OECD Model Tax Convention and its Commentary.

Costa Rica's BEPS Commission

On August 11, 2016, the Costa Rican tax authorities published a resolution³ (the Resolution) establishing the Commission, which will analyze and prepare a proposal of regulatory framework for the implementation of the BEPS Action Plan.

The Commission, which consists of 13 officers from the tax authority, will have the following tasks:

1. Define the guidelines for the analysis, proposal and monitoring of the BEPS Action Plan on a work schedule previously reported to the tax authorities; the work schedule will be updated every six months to take into account the advancements of the OECD on the BEPS project

2. Report to the tax authorities every three months on the Commission's developments according to the timeframe given by the OECD and the work schedule

3. Monitor the BEPS Actions according to the guidelines defined by the OECD through its work teams and committees

In addition, the Commission may require other officers of the Ministry of Finance to prepare technical and legal studies supporting the actions to be undertaken and attend meetings, forums, seminars and trainings related to the BEPS Action Plan.

———————————————

———————————————
ENDNOTES

¹ See Tax Alert 2015-1899.

² The CAF is the body of the OECD responsible for fiscal policy-making.

³ Resolution No. DGT-R-036-2016.