The Platform for Collaboration on Tax (PCT) has released a Toolkit on the Taxation of Offshore Indirect Transfers. The Toolkit provides guidance on design and implementation issues when one country seeks to tax gains on the sale of interests in an entity owning assets located in that country, by an entity which is a tax resident in another country.

The Toolkit addresses a particular concern of developing countries, primarily from the perspective of the country where the underlying assets are located. It covers the taxation of the indirect transfer of assets such as mineral rights and other assets generating location specific issues such as licensing rights for telecommunications, which has been the subject of protracted public interest. This topic is a concern in many developing countries, magnified by the revenue challenges that governments around the world face as a consequence of the COVID-19 crisis.

According to the OECD, the significance of this issue was recognised in the development of the OECD led Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). The MLI includes a provision based upon the OECD and UN model tax conventions, for purposes of extending the reach of existing tax treaties to allocate rights to tax such indirect transfers to location countries, should treaty partners so choose.

More information can be found on the OECD’s website.