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On 6 January 2017, the OECD published the BEPS ACTION 6 – Discussion Draft on non-CIV examples. Taxand provides combined feedback from across the globe.
Taxand recognises that the application of tax treaties to non-CIV funds has been a challenge for tax policy makers and tax administrators as well as for taxpayers and their advisors for many years and that the application of the PPT rule to non-CIV funds is no less challenging. We commend Working Party 1 for recognising that planning for the establishment of a non-CIV fund as a vehicle to serve to aggregate diverse investors from a number of jurisdictions or investments in a number of jurisdictions, or both, including planning to minimise the potential for multiple levels of taxation as investment returns are distributed up from the investments themselves through the aggregation vehicle and then to the ultimate investors, is neither inappropriate nor abusive.
However, we are concerned that the examples, by implication, suggest that particular “real life” facts that do not fit within the narrow confines of those outlined in the examples will not satisfy the PPT rule. In addition to our specific comments below, we would suggest that additional wording be added to the examples to make it clear that such implication is not to be read into the examples. We believe that this is particularly important given the decision to limit the number of examples to three, notwithstanding the apparent recognition in the Discussion Draft that more examples would be helpful to all interested parties.
Access Taxand’s full additional response to the OECD Discussion Draft on non-CIV examples
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Taxand welcomes the inclusion of specific examples on non-CIV funds in paragraph 14 of the Commentary on the Principle Purpose Test (PPT) rule. We consider that these examples should be able to improve significantly tax certainty for tax payers.