1. The BEPS final reports Daniel Szmaragowski 13.10.2015

2. 1 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. Background and features of BEPS Post global financial crisis, Rise of corporate social responsibility, Rise of media focus, UK Uncut and high street action, Antiquated tax system, Internationalization of business, Modern business models. Fast -pace Inclusive Transparent

3. 2 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. SubstanceCoherence Transparency and Certainty 15 Actions and 3 main pillars Hybrid Mismatch Arrangement (2) CFC Rules (3) Interest Deductions (4) Harmful Tax Practices (5) Preventing Tax Treaties Abuse (6) Avoidance of PE Status (7) TP Aspects of Intangibles (8) TP/Risk and Capital (9) TP/High Risk Transactions (10) Measuring BEPS (11) Disclosure Rules (12) TP Documentation (13) Dispute Resolution (14) Digital Economy (1) Multilateral Instrument (15)

4. 3 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. The final package of recommendations On 5 October 2015, the OECD published the final package of recommendations to reform the international tax system, The BEPS project aims to create a single set of international tax rules to protect tax bases while offering increased certainty or predictability to taxpayers, and to eliminate double non- taxation, In relation to several BEPS discussion drafts that were released in 2014 and 2015, various countries has already complied with the BEPS action items and drafted or implemented related legislations.

5. 4 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. Overview of the final BEPS report

6. 5 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. The final BEPS package Digital Economy ■The final report contains an analysis of the tax challenges related to the digital economy, ■Linking with other actions, particularly in the context of treaty abuse (Action 6) and the artificial avoidance of PE status (Action 7). Hybrid Mismatch Arrangements ■First part of the report contains recommendations for certain outstanding issues (16 Sep 2014), ■Final report recommends the introduction of hybrid mismatch rules and certain other domestic provisions (454 pages, examples).

7. 6 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. The final BEPS package CFC rules ■The final report contains recommendations for the effective CFC rules to combat BEPS and long-term deferral, ■The final report sets out the following six building blocks for the design of effective CFC rules: –Definition of a CFC, –CFC exemptions and threshold requirements, –Definition of income, –Computation of income, –Attribution of income, –Prevention and elimination of double taxation. Interest Deductions ■On 18 December 2014 focused on three potential approaches: a group-wide rule, a fixed ratio rule and combination, ■In its final report, the OECD combines an approach where a fixed ratio rule is the default rule and a group ratio rule applying at a country’s election.

8. 7 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. The final BEPS package Harmful tax practices ■The final report sets out an agreed methodology to assess whether there is substantial activity, ■Agreed approach to tracking and tracing, ■Agreed definition of qualifying IP assets, ■Agreed safeguards. Treaty abuse ■The Action 6 include three different approaches –the principal purpose test, –the detailed limitation on benefit rule, –the simplified limitation on benefits rules.

9. 8 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. The final BEPS package Avoidance of PE Status ■Changes to the definition of permanent establishment, ■Work will be carried out in 2016. Actions 8-10: Aligning Transfer Pricing Outcomes with Value Creation ■Intangibles, ■Hard to value intangibles, ■Intra group commodity transactions, ■Low value-adding intra-group services, ■Cost contribution arrangements.

10. 9 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. The final BEPS package Measuring and monitoring BEPS ■Economic analysis of BEPS, ■Recommendation to improve monitoring. Mandatory disclosure rules ■Framework for the design of rules that are flexible to country specific risks and needs, ■Special recommendation for rules that focus on international tax scheme, ■Enhanced models of international sharing using JITSIC network as a platform.

11. 10 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. The final BEPS package Transfer Pricing Documentation including Country-by-country Reporting ■The OECD releases three deliverables: –Guidance on Transfer Pricing Documentation and Country-by-Country (CbC) Reporting - September 2014, –Guidance on the Implementation of Transfer Pricing Documentation and CbC Reporting– February 2015), –CbC Reporting Implementation Package – June 2015. Dispute resolution ■The aim is to improve mutual agreement procedure, ■Minimum standard + peer review + Supplementary commitment. ■Mandatory binding MAP arbitration (over 20 countries)

12. 11 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. The final BEPS package Develop a Multilateral Instruments ■The purpose is to streamline the implementation of tax treaties related to BEPS measures through a multilateral instrument to amend existing bilateral tax treaties, ■Analytical report concluded that multilateral instrument is feasible and desirable.

13. 12 © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic. Next steps New and revised rules Legal certainty and dispute resolution MonitoringTransparency

14. Thank you Daniel Szmaragowski

15. © 2015 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. Printed in the Czech Republic.