Date of Award


Document Type


Degree Name

Master of Laws (LLM)


In recent years, the Organisation for Economic Co-operation and Development (OECD)’s Base Erosion and Profit Shifting (BEPS) project has been one of the biggest issues in international taxation. The OECD refers to BEPS as “tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations.” In 2014, the OECD released BEPS Action 2 as responds on Hybrid Mismatch Arrangements (“HMA”s), which are arrangements exploiting differences in the tax treatment of instruments, entities or transfers between two or more countries. Two of the major factors of HMAs are hybrid entities and hybrid instruments.

In Action 2, OECD recommends that counties introduce a “linking rule” that denies the deduction of costs which give rise to HMA outcomes in the payer jurisdiction, such as double deduction, deduction with no inclusion, indirect deduction with no inclusion, as the main measures for addressing HMAs. Among the 15 Actions of the BEPS Project, Action on HMAs is strongly recommended by OECD and G20 to the 100 countries that plan to implement BEPS. However, considering the historical and economic background of each country, it is difficult to solve HMAs solely with the uniform introduction of a linking rule. Some countries have developed their own countermeasures to HMAs. To successfully counter HMAs, one needs to study the HMA phenomenon and research the current rules. The purpose of this thesis is to examine the ways of responding to the hybrid entities and hybrid instruments of countries including the U.S. and to make policy proposals to solve HMA problems in Korea.