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Neutralizing effects of hybrid mismatch arrangementsA.2.6 The mismatch in figure 2 [figure 2.2 in the OECD Action2 — 2014 Deliverable] in the OECD Public Discussion Draft on BEPSAction 2 — Domestic Issues would largely be addressed by Country Adenying underlying foreign tax relief to B Co for foreign tax that isgranted relief in Country B and comprehensive withholding tax inCountry A for the deductible financing expenses. In particular, duringthe term of the repurchase agreement, Country A might deny A Counderlying foreign tax relief because B Co is granted dividend relief inCountry B for the same dividend. In this sense, the example is similar tothat in example 10, discussed below (a discussion that is relevant here).In addition, if Country A simultaneously grants A Co a deduction forthe dividends as a financing expense, it might subject the dividends tocomprehensive withholding tax, even though Country B does not seethat income and thus will not grant a foreign tax credit for the tax.A.2.7 The mismatch in figure 3 in the OECD Public Discussion Drafton BEPS Action 2 — Domestic Issues would be addressed in the samemanner as the mismatch in figure 2 [figure 2.2 in the OECD Action2 — 2014 Deliverable] except that the comprehensive withholding taxfor the deductible financing expenses would be imposed by Country B.Again, it makes little sense for Country B to refund interest withholdingtax to B Co and not impose withholding tax on the correspondingmanufactured interest payment made by B Co. e Further, it makes littlesense for Country A to give A Co a foreign tax credit for Country B taxthat is credited (and partly refunded) to B Co.A.2.8 The mismatch in figure 19 of the OECD Public DiscussionDraft on BEPS Action 2 — Domestic Issues would largely be addressedby comprehensive withholding tax in Country A for the deductiblefinancing expense. Beyond that, it is hard to comment with respect tothe example because it lacks sufficient detail, for example, on timingof the deduction for the financing expense, whether A Co receivesincome from the asset during the term of the repurchase agreementand what amount it receives for the resale under the agreement.eThis is less likely to be hampered by Article 21 (Other income) of theUnited Nations Model Convention, which preserves greater source-State taxingrights over other income when compared with Article 21 (Other income)of the OECD Model Convention.265