Aggressive tax planning

OECD releases discussion draft on branch mismatch structures under Action 2 of the BEPS Action Plan


22/08/2016 – Interested parties are invited to provide comments on a discussion draft (French version available here) which deals with branch mismatch structures under Action 2 (Neutralising the Effects of Hybrid Mismatch Arrangements) of the BEPS Action Plan.


The Report on Neutralising the Effects of Hybrids Mismatch Arrangements (Action 2 Report) sets out recommendations for domestic rules designed to neutralise mismatches in tax outcomes that arise in respect of payments under a hybrid mismatch arrangement. The recommendations in Chapters 3 to 8 of that report set out rules targeting payments made by or to a hybrid entity that give rise to one of three types of mismatches:

  1. deduction / no inclusion (D/NI) outcomes, where the payment is deductible under the rules of the payer jurisdiction but not included in the ordinary income of the payee;
  2. double deduction (DD) outcomes, where the payment triggers two deductions in respect of the same payment; and
  3. indirect deduction / no inclusion (indirect D/NI) outcomes, where the income from a deductible payment is set-off by the payee against a deduction under a hybrid mismatch arrangement.


The report includes specific recommendations for improvements to domestic law intended to reduce the frequency of such mismatches as well as targeted hybrid mismatch rules which adjust the tax consequences in either the payer or payee jurisdiction in order to neutralise the hybrid mismatch without disturbing any of the other tax, commercial or regulatory outcomes. This discussion draft applies the analysis and recommendations set out in the Action 2 Report to mismatches that can arise through the use of branch structures. The discussion draft identifies five basic types of branch mismatch arrangements and sets out preliminary recommendations for domestic rules, based on those in the Action 2 Report, which would neutralise the resulting mismatch in tax outcomes.


As part of the transparent and inclusive consultation process mandated by the Action Plan, the CFA invites interested parties to send comments on this discussion draft, including responses to the specific questions identified in the discussion draft where input is required to advance this work.


Comments should be submitted by 19 September 2016 at the latest (no extension will be granted) by email to in Word format. They should be addressed to the International Co-operation and Tax Administration Division, OECD/CTPA.


Please note that all comments received regarding this discussion draft will be made publicly available. Comments submitted in the name of a collective “grouping” or “coalition”, or by any person submitting comments on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective grouping or coalition, or the person(s) on whose behalf the commentator(s) are acting.