Harmful Tax Practices - 2018 Progress Report on Preferential Regimes
Inclusive Framework on BEPS: Action 5
BEPS Action 5 is one of the four BEPS minimum standards which all Inclusive Framework
members have committed to implement. One part of the Action 5 minimum standard relates
to preferential tax regimes where a peer review is undertaken to identify features
of such regimes that can facilitate base erosion and profit shifting, and therefore
have the potential to unfairly impact the tax base of other jurisdictions.
This progress report is an update to the 2015 BEPS Action 5 report and the 2017 Progress
Report. It contains the results of review of all BEPS Inclusive Framework members’
preferential tax regimes that have been identified since the BEPS Project. The results
are reported as at January 2019.
In addition, the Inclusive Framework agreed on a new standard for substantial activities
requirements for no or only nominal tax jurisdictions. This report includes the details
of this new standard and the other work on additions to and revisions of the harmful
tax practices framework. Finally it contains next steps for the work on harmful tax
Published on January 29, 2019Also available in: French
The assessments of preferential tax regimes are conducted by the Forum on Harmful Tax Practices (FHTP), comprising over 140 member jurisdictions of the Inclusive Framework. Since the start of the BEPS Project, the FHTP has reviewed a total of 319 preferential tax regimes. The latest assessment by the FHTP (during its November 2022 meeting) has yielded new conclusions on 13 regimes.
In doing so, the Inclusive Framework will ensure that substantial activities must be performed in respect of the same types of mobile business activities, regardless of whether they take place in a preferential regime or in a no or only nominal tax jurisdiction.
The Action 5 minimum standard consists of two parts. One part relates to preferential tax regimes, where a peer review is undertaken to identify features of such regimes that can facilitate base erosion and profit shifting, and therefore have the potential to unfairly impact the tax base of other jurisdictions. The second part includes a commitment to transparency through the compulsory spontaneous exchange of relevant information on taxpayer-specific rulings which, in the absence of such information exchange, could give rise to BEPS concerns.