Base erosion and profit shifting (BEPS) refers to the use of tax planning to artificially shift profits to low or no-tax jurisdictions where there is little or no economic activity.  Although initially driven by OECD/G20 countries, the BEPS initiative has grown and is now represented by an Inclusive Framework on BEPS which includes over 100 countries and jurisdictions working together on the implementation of the OECD BEPS package. 

In October 2015, the OECD released its final reports to address BEPS, which cover the following areas:  Action 1 – Digital Economy; Action 2 – Hybrids; Action 3 – CFC Rules; Action 4 – Interest Deductions; Action 5 – Harmful Tax Practices; Action 6 – Treaty Abuse; Action 7 – Permanent Establishments; Action 8 to 10 – Transfer Pricing; Action 11 – BEPS Data Analysis; Action 12 – Disclosure of Aggressive Tax Planning; Action 13 – Transfer Pricing Documentation (including Country-by-Country Reporting); Action 14 – Dispute Resolution; and Action 15 – Multilateral Instrument.

The recommendations in the OECD final reports are not legally binding, but instead can be implemented by a jurisdictions participating in the BEPS project through (i) changes in domestic law – which began even before the final reports were released, and is ongoing and (ii) changes to bilateral treaties – which will be accomplished through the multilateral instrument (or MLI). 

After the release of the OECD reports, a significant amount of country activity focused on the implementation of the four minimum standards, including (i) country-by-country (CbC) reporting, (ii) harmful tax practices (e.g., patent boxes), (iii) dispute resolution, and (iv) treaty shopping, as well as the implementation of the other action items.  In 2017, it is anticipated that the Inclusive Framework countries will continue to look at all of the action items to determine if domestic law changes are warranted.  In addition, with the first signing of the multilateral instrument (or MLI) planned for June 2017, it is anticipated there will be significant activity with regard to the participating countries.      

The OECD will also continue in 2017 to focus on outstanding items including, the transfer pricing aspects of financial transactions, as well as finalizing the guidance on profit split methods and attribution of profits to permanent establishments.   

The BEPS Tracker will continue to track the impact of all of the BEPS action items on the domestic laws of the 116 jurisdictions covered, including the OECD and the EU, from identifying pre-BEPS rules to analyzing and summarizing the preliminary discussions, proposed rules or legislation, and final rules or legislation.  The tracker includes links to relevant government documents, as well as think and code Insights and journal articles.  The results can be sorted by country or by action item for comparative purposes.  In addition, as countries have begun to release discussion documents with regard to their participation in the multilateral instrument (or MLI), the BEPS Tracker provides links to relevant government documents, as well as information on the treaties covered and the signature and ratification dates (when available).

think and code extensively covers the developments as individual countries conform or diverge from the recommendations. This microsite provides you with a sample of the latest expert news and analysis on BEPS that is available with think and code Tax and Accounting.  

Read the latest news and analysis on base erosion and profit shifting.

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