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BEPS Action 4

Limit base erosion via interest deductions and other financial payments

Description of this action in OECD's Action Plan (July 2013)

Develop recommendations regarding best practices in the design of rules to prevent base erosion through the use of interest expense, for example through the use of related-party and third-party debt to achieve excessive interest deductions or to finance the production of exempt or deferred income, and other financial payments that are economically equivalent to interest payments. The work will evaluate the effectiveness of different types of limitations. In connection with and in support of the foregoing work, transfer pricing guidance will also be developed regarding the pricing of related party financial instruments, including financial and performance guarantees, derivatives (including internal derivatives used in intra-bank dealings), and captive and other insurance arrangements. The work will be co-ordinated with the work on hybrids and CFC rules.

Expected output and deadline for this action in OECD's Action Plan (July 2013)

Expected output 1: Recommendations regarding the design of domestic rules
Deadline: September 2015

Expected output 2: Changes to the Transfer Pricing Guidelines
Deadline: December 2015

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