Centre for Tax Policy and Administration

BEPS Actions

 

Base Erosion and Profit Shifting

 

Developed in the context of the OECD/G20 BEPS Project, the 15 actions set out below equip governments with domestic and international instruments to address tax avoidance, ensuring that profits are taxed where economic activities generating the profits are performed and where value is created.


EXPLANATORY

STATEMENT

 

EXPLANATORY STATEMENT 2015

The OECD/G20 BEPS Project creates a single set of consensus-based international tax rules to protect tax bases while offering increased certainty and predictability to taxpayers.

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ACTION 1

DIGITAL ECONOMY

 

ADDRESSING THE TAX CHALLENGES OF THE DIGITAL ECONOMY

Action 1 addresses the tax challenges of the digital economy and identifies the main difficulties that the digital economy poses for the application of existing international tax rules. The Report outlines options to address these difficulties, taking a holistic approach and considering both direct and indirect taxation. 

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ACTION 2

HYBRIDS

 

NEUTRALISING THE EFFECTS OF HYBRID MISMATCH ARRANGEMENTS

Action 2 develops model treaty provisions and recommendations regarding the design of domestic rules to neutralise the effects of hybrid instruments and entities (e.g. double non-taxation, double deduction, long-term deferral).

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ACTION 3

CFC RULES

 

DESIGNING EFFECTIVE CONTROLLED FOREIGN COMPANY (CFC) RULES

Action 3 sets out recommendations to strengthen the rules for the taxation of controlled foreign corporations (CFC). 

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ACTION 4

INTEREST DEDUCTIONS

 

LIMITING BASE EROSION INVOLVING INTEREST DEDUCTIONS AND OTHER FINANCIAL PAYMENTS

Action 4 outlines a common approach based on best practices for preventing base erosion through the use of interest expense, for example through the use of related-party and third-party debt to achieve excessive interest deductions or to finance the production of exempt or deferred income. 

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ACTION 5

HARMFUL TAX PRACTICES

 

COUNTERING HARMFUL TAX PRACTICES MORE EFFECTIVELY, TAKING INTO ACCOUNT TRANSPARENCY AND SUBSTANCE

Action 5 revamps the work on harmful tax practices with a focus on improving transparency, including compulsory spontaneous exchange on rulings related to preferential regimes, and on requiring substantial activity for preferential regimes, such as IP regimes. 

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ACTION 6

TREATY ABUSE

 

PREVENTING THE GRANTING OF TREATY BENEFITS INAPPROPRIATE CIRCUMSTANCES

Action 6 develops model treaty provisions and recommendations regarding the design of domestic rules to prevent treaty abuse.

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ACTION 7

PERMANENT ESTABLISHMENT STATUS

 

PREVENTING THE ARTIFICIAL AVOIDANCE OF PERMANENT ESTABLISHMENT STATUS

Action 7 contains changes to the definition of permanent establishment to prevent its artificial circonvention, e.g. via the use of commissionaire structures and the likes.

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ACTIONS 8-10

TRANSFER PRICING

Intangibles
Risks & Capital
High-Risk Transactions

 

ALIGNING TRANSFER PRICING OUTCOMES WITH VALUE CREATION

Actions 8 – 10 contain transfer pricing guidance to assure that transfer pricing outcomes are in line with value creation in relation to intangibles, including hard-to-value ones, to risks and capital, and to other high-risk transactions.

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ACTION 11

BEPS DATA ANALYSIS

 

MEASURING AND MONITORING BEPS 

Action 11 establishes methodologies to collect and analyse data on BEPS and the actions to address it, develops recommendations regarding indicators of the scale and economic impact of BEPS and ensure that tools are available to monitor and evaluates the effectiveness and economic impact of the actions taken to address BEPS on an ongoing basis.

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ACTION 12

DISCLOSURE OF AGGRESSIVE TAX PLANNING

 

MANDATORY DISCLOSURE RULES

Action 12 contains recommendations regarding the design of mandatory disclosure rules for aggressive tax planning schemes, taking into consideration the administrative costs for tax administrations and business and drawing on experiences of the increasing number of countries that have such rules. 

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ACTION 13

TRANSFER PRICING DOCUMENTATION

 

TRANSFER PRICING DOCUMENTATION AND COUNTRY-BY-COUNTRY REPORTING

Action 13 contains revised guidance on transfer pricing documentation, including the template for country-by-country reporting, to enhance transparency while taking into consideration compliance costs.

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ACTION 14

DISPUTE RESOLUTION

 

MAKING DISPUTE RESOLUTION MECHANISMS MORE EFFECTIVE

Action 14 develops solutions to address obstacles that prevent countries from solving treaty-related disputes under MAP, via a minimum standard in this area as well as a number of best practices. It also includes arbitration as an option for willing countries.

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ACTION 15

MULTILATERAL INSTRUMENT

 

DEVELOPING A MULTILATERAL INSTRUMENT TO MODIFY BILATERAL TAX TREATIES

Action 15 provides an analysis of the legal issues related to the development of a multilateral instrument to enable countries to streamline the implementation of the BEPS treaty measures, as well as the mandate to carry out that work in 2016. As per the OECD/G20 mandate, the ad hoc Group that will complete the work under Action 15 has been established, with over 90 countries participating.

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