Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies used by multinational enterprises to exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations.
The G20/OECD BEPS Project
To combat these strategies, the OECD and G20 introduced a comprehensive 15-Action Plan framework to ensure profits are taxed where the economic activities generating them are performed and where value is created.
Core Actions of the BEPS Framework
  • Action 1: Addressing the Tax Challenges of the Digital Economy: Focuses on companies that interact with consumers digitally without a physical presence, evolving into the Two-Pillar Solution.
  • Action 4: Limitation on Interest Deductions: Prevents companies from stripping profits out of high-tax countries by loading local subsidiaries with excessive intra-group debt and deducting high interest expenses.
  • Action 5: Countering Harmful Tax Practices: Demands transparency by requiring countries to spontaneously exchange information on spontaneous tax rulings and intellectual property regimes.
  • Action 13: Country-by-Country (CbC) Reporting: Forces large multinational enterprises to provide an annual breakdown of revenue, profits, taxes paid, and employees for every single country they operate in.

The Multilateral Instrument (MLI)
The MLI is a single multilateral treaty that allows jurisdictions to swiftly amend thousands of existing bilateral DTAs to include BEPS anti-abuse provisions, eliminating the need to renegotiate each treaty individually.
 
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