Base Erosion and Profit Shifting (BEPS)

The Base Erosion and Profit Shifting (BEPS) project is a joint OECD/G20 initiative designed to combat tax avoidance strategies used by multinational enterprises. These strategies exploit gaps and mismatches in national and international tax rules to artificially shift profits to low- or no-tax jurisdictions.

• Launched in 2013 at the request of the G20
• 15 Action Points address the most significant BEPS risks
• Final reports published in 2015
• Over 135 countries and jurisdictions participate (Inclusive Framework)
• Foundation for the Two-Pillar Solution (Pillar One & Two)

Prior to BEPS, multinational corporations aggressively used international tax planning structures – well-known examples include the “Double Irish”, “Dutch Sandwich” and other hybrid arrangements. Studies estimated annual global tax revenue losses at USD 100–240 billion.

In 2012, G20 Finance Ministers mandated the OECD to develop an action plan. In February 2013, the OECD published “Addressing Base Erosion and Profit Shifting”, followed in July 2013 by the BEPS Action Plan with 15 Action Points. Final reports were endorsed at the G20 Leaders’ Summit in Antalya in November 2015.

In 2016, the OECD and G20 established the Inclusive Framework on BEPS, giving non-OECD countries an equal seat at the table. The Multilateral Instrument (MLI, BEPS Action 15) entered into force in 2018. In 2021, the Inclusive Framework agreed on the Two-Pillar Solution as the next stage of the BEPS response to the digital economy.

The BEPS project applies globally to multinational enterprises operating across multiple tax jurisdictions. The 15 Action Points cover the following thematic areas:

• Hybrid arrangements and permanent establishment status
• Transfer pricing and value creation
• Transparency and CbC reporting
• Harmful tax practices and treaty abuse
• Dispute resolution and multilateral instruments

Implementation obligations vary by Action Point – minimum standards (Actions 5, 6, 13, 14) are binding for members of the Inclusive Framework.

• Implementation of the four minimum standards (Actions 5, 6, 13, 14)
• Peer review process to monitor implementation
• Adaptation of domestic tax laws and double tax treaties
• Introduction of Country-by-Country Reporting (CbCR) for groups with revenue above EUR 750 million
• Ratification or application of the Multilateral Instrument (MLI)

Bidirectional duplicate cleaned up.

CbCR is the output of BEPS Action 13 — parent connection was missing.