As part of a series of toolkits to ‘help guide developing
countries in the implementation of policy options for issues in international
taxation of greatest relevance to these countries’, the OECD’s Platform for
Collaboration on Tax (PCT) has published a Toolkit
on the taxation of offshore indirect transfers.
Offshore indirect transfers (OITs) are sales of an entity
owning an asset located in one country by a resident of another. The toolkit
addresses the issue taxation rights where, for example, the country in which
the underlying asset is located wishes to tax gains realised on transfer. While
this may apply already to direct transfers of immovable assets, the toolkit
considers the application of similar treatment to a wider class of assets.
The taxation of indirect transfers of assets such as mineral
rights, and other assets generating location-specific rents such as licensing
rights for telecommunications is a concern in many developing countries,
magnified by the revenue challenges that governments around the world face as a
consequence of coronavirus. The PCT toolkit gives practical guidance for
developing countries on considerations that might arise when deciding to tax
offshore indirect transfers, including the types of assets to tax and how to
design and implement OIT taxation in domestic law. It also proposes two models
for domestic legislation which countries might consider adopting to tax such
transfers: (1) the OIT is treated as a deemed disposal of the underlying asset,
and (2) the transfer is treated as being made by the actual seller, offshore,
but sources the gain on that transfer within the location country and so
enables that country to tax it.
As part of a series of toolkits to ‘help guide developing
countries in the implementation of policy options for issues in international
taxation of greatest relevance to these countries’, the OECD’s Platform for
Collaboration on Tax (PCT) has published a Toolkit
on the taxation of offshore indirect transfers.
Offshore indirect transfers (OITs) are sales of an entity
owning an asset located in one country by a resident of another. The toolkit
addresses the issue taxation rights where, for example, the country in which
the underlying asset is located wishes to tax gains realised on transfer. While
this may apply already to direct transfers of immovable assets, the toolkit
considers the application of similar treatment to a wider class of assets.
The taxation of indirect transfers of assets such as mineral
rights, and other assets generating location-specific rents such as licensing
rights for telecommunications is a concern in many developing countries,
magnified by the revenue challenges that governments around the world face as a
consequence of coronavirus. The PCT toolkit gives practical guidance for
developing countries on considerations that might arise when deciding to tax
offshore indirect transfers, including the types of assets to tax and how to
design and implement OIT taxation in domestic law. It also proposes two models
for domestic legislation which countries might consider adopting to tax such
transfers: (1) the OIT is treated as a deemed disposal of the underlying asset,
and (2) the transfer is treated as being made by the actual seller, offshore,
but sources the gain on that transfer within the location country and so
enables that country to tax it.
