The Organization for Economic Cooperation and Development (OECD) is an organization of industrialized countries responsible for creating a model tax treaty known as the Model Tax Convention. Since 2006, NAREIT and its foreign partners in the Real Estate Equity Securitization Alliance (REESA) have worked collaboratively with the OECD on REIT-related provisions in the treaty.
The Model Tax Convention suggests REIT dividends paid to portfolio investors residing in other countries should be taxed at a lower tax rate – usually 15 percent. However, following concerns from the G-20 nations regarding the perception of tax avoidance by multinational companies, the OECD launched a project in 2014 to address Base Erosion and Profit Shifting (BEPS). While the OECD’s BEPS plan involves 15 separate action items, Action 6, which suggested restrictions to prevent companies from using tax treaties to lower their tax rates, has particular relevance to REITs that invest overseas.
While Action 6, if implemented, should not affect negatively US listed or public, non-listed REITs, NAREIT would prefer the Model Tax Convention’s commentary clarify that listed US REITs would be considered eligible for treaty benefits in the country where the exchange on which their shares trade is located. Additionally, NAREIT believes additional clarification is necessary to better explain whether non-listed REITs and/or non-REIT subsidiaries of US listed or non-listed REITs would qualify for treaty benefits. These concerns were relayed to OECD in a June 2014 comment letter
In September 2014 the OECD issued a new public discussion draft that sought input on a number of issues that NAREIT and others had raised. NAREIT submitted another comment letter to the OECD in January 2015 reiterating NAREIT’s position that any changes to the OECD Model Tax Convention proposed under Action 6 do not inappropriately deny treaty benefits to REITs and other investment vehicles that have become such an important part of the global economy. Additionally, the letter stressed the need for greater clarification regarding the entitlement of US REITs to treaty benefits.
STATUS: NAREIT will continue to work with our consultant to coordinate with the US Treasury Department to ensure that the final Action 6 proposal treats US REITs appropriately.
- Final OECD Action 6 Report - 10/5/15
- NAREIT Letter to the U.S. Treasury Department Regarding Proposed Changes to the Model US Tax Convention - 9/15/15
- NAREIT Comments on the OECD Revised Discussion Draft on BEPS Action 6 - 6/17/15
- NAREIT’s Submission to the OECD Regarding BEPS Action 6 - 1/9/15
- OECD Public Discussion Draft: “Follow Up Work on BEPs Action 6: Preventing Treaty Abuse” - 11/21/14
- OECD/G20 Base Erosion and Profit Shifting Project: “Preventing the Granting of Treaty Benefits in Inappropriate Circumstances” – Action 6: 2014 Deliverable - 9/15/14
- NAREIT Submission on BEPS Action 6 - 6/5/14
- BEPS Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances - 4/9/14
- 2008 Update to OECD Model - 7/16/08
- Global Real Estate Organizations Comment on OECD Public Discussion Draft on Tax Treaty Issues Related to REITs - 1/2/08
- OECD Tax Treaty Issues Related to REITs - 10/30/07