OECDs BEPS involving interest in the banking and insurance sectors2

28 july 2016 - BEPS action 4 - discussion draft on approaches to address beps involving interest in the banking and insurance sectors. The report on Action 4, Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, establishes a common approach to tackling BEPS involving interest, but highlights a number of factors which suggest that a difference approach may be needed to address risks posed by entities in the banking and insurance sectors.

These include the fact that banks and insurance companies typically have net interest income rather than net interest expense, the different role that interest plays in banking and insurance compared with other sectors, and the fact that banking and insurance groups are subject to regulatory capital requirements that restrict the ability of groups to place debt in certain entities.

The Report therefore provides at paragraphs 188 to 190 that countries may exclude entities in banking and insurance groups, and regulated banks and insurance companies in non-financial groups, from the scope of the fixed ratio rule and group ratio rule, with work to be conducted in 2016 to identify approaches suitable for addressing the BEPS risks posed by these sectors, taking into account their particular characteristics.

This discussion draft has been produced as part of the follow-up work on this issue, which focuses on - 

  • the risks posed by banking and insurance groups to be addressed under Action 4,
  • approaches to address risks posed by banks and insurance companies, and 
  • approaches to address risks posed by entities in a group with a bank or insurance company.

The discussion draft includes a number of specific questions (which appear in boxes) related to particular aspects of these topics. The CFA invites interested parties to send written responses to these questions, in order to facilitate the analysis of the issues covered by the discussion draft.

As indicated in the final question, interested parties may also offer additional comments on any of the issues raised in the document. Responses should be sent by email to This email address is being protected from spambots. You need JavaScript enabled to view it. in Word format, by no later than 8 September 2016. They should be addressed to the International Co-operation and Tax Administration Division, OECD/CTPA. 

Table of Contents of Tax Transparency