BEPS Action 2: Hybrid Mismatches

Hybrid mismatches are a popular tax avoidance tool among multinational corporations (MNCs). In response, the Organisation for Economic Co-operation and Development (OECD) published a comprehensive 458-page final report in 2015 addressing hybrid mismatch arrangements. The report is highly technical and covers a wide range of topics.

Since this article is targeted at non-specialists with a basic understanding of international taxation, we will simplify the concepts using examples and divide the discussion into four sections:

1. What is a hybrid mismatch?
2. How do MNCs use hybrid mismatches to avoid taxes?
3. What recommendations has the OECD made to address hybrid mismatches?
4. Have all the loopholes been closed?