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Double non-taxation

16 May 2012   (0 Comments)
Posted by: SAIT Technical
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Senior tax officials from OECD countries met in Montreal on 8-10 May 2012 to discuss unintended double non-taxation due to the use of hybrid mismatch arrangements.  The meeting was organised by the Canada Revenue Agency (CRA) in cooperation with the OECD.

Participants discussed recent trends in the area of hybrid mismatch arrangements and shared ideas and experiences on detection, deterrence and response strategies used across the world. Discussion focused on recent developments and also on the group of users and promoters. Participants included representatives from Australia, Austria, Canada, Chile, Denmark, Germany, Italy, Japan, Korea, Mexico, the Netherlands, New Zealand, Spain, Sweden, the United Kingdom and the United States.

Commenting on the meeting, CRA Assistant Commissioner, Mr. Terrance McAuley, stated that "As modern tax administrations share similar challenges they recognize the need to collaborate more in managing international tax risks and in responding to the challenges and opportunities of the global tax environment”.



Countries have historically set-up their tax systems and the elements thereof in isolation. In a globalised world this creates opportunities for arbitrage through hybrid mismatch arrangements. These arrangements exploit differences in the tax treatment of instruments, entities and transfers between two or more countries. Recurring elements include the use of hybrid entities, dual residence companies, hybrid instruments and transfers.

Typical effects which hybrids aim at achieving are double deductions (where a deduction related to the same contractual obligation is claimed for income tax purposes in two or more different countries), deduction / no inclusion (where there is a deduction in one country but no corresponding inclusion in the taxable income in another country), and foreign tax credit generators (which generate foreign tax credits that would otherwise not be available.

These arrangements raised policy issues in terms of tax revenue, competition, economic efficiency, transparency and fairness. 


A recent OECD report Hybrid Mismatch Arrangements: Tax Policy and Compliance Issues recommends to:

  • Consider introducing or revising targeted rules denying benefits;
  • Consider the introduction of mandatory disclosure obligations for taxpayers using these schemes;
  • Continue to share intelligence and information and build capacity in their tax administrations.

For further information, see the report "Hybrid Mismatch Arrangements: Tax Policy and Compliance Issues”.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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