Tax

About BEPS

 

About | Deliverables | CFA | Key areas of work

 

About BEPS 

In an increasingly interconnected world, national tax laws have not kept pace with global corporations, fluid capital, and the digital economy, leaving gaps that can be exploited by companies who avoid taxation in their home countries by pushing activities abroad to low or no tax jurisdictions. This undermines the fairness and integrity of tax systems. The project, quickly known as BEPS (Base Erosion and Profit Shifting) looks at whether or not the current rules allow for the allocation of taxable profits to locations different from those where the actual business activity takes place, and what could be done to change this if they do.

Following the Declaration on BEPS adopted at the 2013 Ministerial Council Meeting and at the request of G20 Finance Ministers, in July 2013 the OECD launched an Action Plan on Base Erosion and Profit Shifting (BEPS), identifying 15 specific actions needed in order to equip governments with the domestic and international instruments to address this challenge. The plan recognises the importance of addressing the borderless digital economy, and will develop a new set of standards to prevent double non-taxation. This will require closer international co-operation, greater transparency, data and reporting requirements. To ensure that the actions can be implemented quickly, a multilateral instrument to amend bilateral tax treaties will be developed.

This Action Plan was fully endorsed by the G20 Finance Ministers and Central Bank Governors at their July 2013 meeting in Moscow as well as the G20 Heads of State at their meeting in Saint-Petersburg in September 2013. The actions outlined in the plan are aimed to be delivered within the coming 18 to 24 months. For the first time ever in tax matters, non-OECD/G20 countries are involved on an equal footing.

 

For more detailed information, read our Frequently Asked Questions.

 

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Deliverables

The BEPS Action Plan provides for 15 actions scheduled to be finalised in three phases: September 2014, September 2015 and December 2015. Deliverables are expected:


September 2014

  • An in-depth report identifying tax challenges raised by the digital economy and the necessary actions to address them (Action 1);
  • Recommendations regarding the design of domestic and tax treaty measures to neutralise the effects of hybrid mismatch arrangements, both from a domestic and treaty law perspective (Action 2);
  • Finalise the review of member country regimes in order to counter harmful tax practices more effectively (Action 5);
  • Recommendations regarding the design of domestic and tax treaty measures to prevent abuse of tax treaties (Action 6);
  • Changes to the transfer pricing rules in relation to intangibles (Action 8);
  • Changes to the transfer pricing rules in relation to documentation requirements (Action 13); and
  • A report on the development of a multilateral instrument to implement the measures developed in the course of the work on BEPS (Action 15).

September 2015

  • Recommendations regarding the design of domestic rules to strengthen Controlled Foreign Companies (CFC) Rules (Action 3);
  • Recommendations regarding the design of domestic rules to limit base erosion via interest deductions and other financial payments (Action 4);
  • Strategy to expand participation to non-OECD members to counter harmful tax practices more effectively (Action 5);
  • Tax treaty measures to prevent the artificial avoidance of permanent establishment status (Action 7);
  • Changes to the transfer pricing rules in relation to risks and capital, and other high-risk transactions (Actions 9 and 10);
  • Recommendations regarding data on BEPS to be collected and methodologies to analyse them (Action 11);
  • Recommendations regarding the design of domestic rules to require taxpayers to disclose their aggressive tax planning arrangements (Action 12);
  • Tax treaty measures to make dispute resolution mechanisms more effective (Action 14).

December 2015

  • Changes to the transfer pricing rules to limit base erosion via interest deductions and other financial payments (Action 4);
  • Revision of existing criteria to counter harmful tax practices more effectively (Action 5); and
  • The development of a multilateral instrument (Action 15).

 

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The role of the OECD Committee on Fiscal Affairs


The technical work on BEPS is being undertaken by the OECD Committee on Fiscal Affairs (CFA) through its subsidiary bodies, namely:

 

  • Working Party 1 (Tax Conventions and Related Questions), in relation to part of action 2 (Neutralise the Effects of Hybrid Mismatch Arrangements), action 6 (Prevent Treaty Abuse), action 7 (Prevent the Artificial Avoidance of PE Status), and action 14 (Make Dispute Resolution Mechanisms More Effective);
  • Working Party 2 (Tax Policy Analysis and Tax Statistics), in relation to action 11 (Establish Methodologies to Collect and Analyse Data on BEPS);
  • Working Party 6 (Taxation of Multinational Enterprises), in relation to part of action 4 (Limit Base Erosion via Interest Deductions and Other Financial Payments), actions 8 (Assure that Transfer Pricing Outcomes are in Line With Value Creation / Intangibles), 9 (Assure that Transfer Pricing Outcomes are in Line With Value Creation / Risks and Capital), 10 (Assure that Transfer Pricing Outcomes are in Line With Value Creation / Other High-Risk Transactions), and 13 (Re-examine Transfer Pricing Documentation);
  • Working Party 11 (Aggressive Tax Planning), established by the CFA to carry out the work in relation to part of action 2 (Neutralise the Effects of Hybrid Mismatch Arrangements), action 3 (Strengthen CFC rules), part of action 4 (Limit Base Erosion via Interest Deductions and Other Financial Payments), and action 12 (Require Taxpayers to Disclose their Aggressive Tax Planning Arrangements).
  • Forum on Harmful Tax Practices (FHTP), in relation to action 5 (Counter Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance); and
  • Task Force on Digital Economy (TFDE), established by the CFA to carry out the work in relation action 1 (Address the Tax Challenges of the Digital Economy).

 

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Key areas of work

There are number of key areas of work on which the OECD Committee on Fiscal Affairs, through its subsidiary bodies, is currently focusing on. These include:

•    Aggressive Tax Planning
•    Transfer Pricing
•    Tax Treaties

•    Tax Policy and Statistics
•    Tax and Development
•    Tax Compliance

 

>> Go to the BEPS home page

 

 

 

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