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Neutralizing effects of hybrid mismatch arrangements(although, as noted in annex II to the present chapter, figure 19 seems tolack some detail). As the examples in the OECD Public Discussion Drafton BEPS Action 2 — Domestic Issues note, such mismatches often resultfrom different characterizations of repurchase agreements. 44 As example9 above notes, such a mismatch can also arise as a result of differentcharacterization of a lease (finance versus operating).2.3 Hybrid entity paymentsThe hybrid entity payments part of the OECD Public Discussion Drafton BEPS Action 2 — Domestic Issues covers only payments made byhybrid entities. These are of two basic types. The first involves twocountries recognizing that a payment is made by different entities,with each granting a deduction. This was discussed in section 1.2above and is illustrated by OECD figure 6. 45 The second involves onecountry recognizing a payment made by an entity while another doesnot recognize a payment at all. This was illustrated in example 11, discussedin section 1.4 above — see also OECD figure 9. 46Conceptually, the second type of mismatch covered under thisheading is confusing. It is true that it involves a payment made by ahybrid entity, but equally it involves a payment received by a hybridentity. 47 Inherently this second type is therefore related to what the44OECD Public Discussion Draft on BEPS Action 2 — Domestic Issues,supra note 2, figures 2, 3, 5 and 20; pages 21, 23, 36 and 74, respectively. Itis clear that while this type of mismatch often involves shares of controlledentities, “virtually any asset that generates” some form of tax relief can beused (see paragraph 66).45Ibid., supra note 2, 44. Figure 3.1 in OECD Action 2 — 2014 Deliverable,supra note 2, 51, illustrates the same example.46OECD Public Discussion Draft on BEPS Action 2 — Domestic Issues,supra note 2, 48. Figure 2.3 in OECD Action 2 — 2014 Deliverable, supra note2, 42, illustrates the same example.47For example, in figure 9, OECD Public Discussion Draft on BEPSAction 2 — Domestic Issues, supra note 2, 48, Country B sees the head officeof A Co (or A Co less B Co) as an entity separate from B Co and so sees thehead office as the recipient of the payment. By comparison, Country A doesnot see the head office as separate from the rest of A Co (B Co being consideredpart of A Co), making the head office a hybrid entity.219