Charles Yorke (Allen & Overy) reviews Action 4 of the BEPS report.
In short Action 4 is intended
to prevent excessive interest deductions in relation to both outbound and inbound investments that shift profits to low tax jurisdictions and give an unfair advantage to multinational corporations (MNCs) over domestic groups.
The perception has been that MNCs allocate their third party debt to high tax jurisdictions rather than low tax jurisdictions: if investment is made from a low tax jurisdiction into a high tax jurisdiction then the third party acquisition debt is pushed down into the target; whereas if an investment is made from a high tax jurisdiction into a low tax jurisdiction then the debt is retained at the level of...
