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BEPS Inclusive Framework At The 100-Country Milestone


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In February 2016, the Organization for Economic Cooperation and Development (OECD) announced the launch of a new framework that would allow the widest possible participation by countries in its base erosion and profit shifting (BEPS) work. Known as the BEPS Inclusive Framework, more than 100 countries and territories are now involved

BEPS Background

The BEPS project was launched by the OECD on behalf of the G-20 countries and OECD member states in 2013 to tackle the deficiencies of current international tax rules and to modernize rules internationally to keep pace with the evolution of the digital economy.

The OECD's recommendations in 15 areas, published in full in October 2015, are intended to provide governments with "comprehensive, coherent and coordinated" solutions for closing gaps that allow corporate profits to "disappear" or be artificially shifted to low- or no-tax jurisdictions.

G20 finance ministers and central bank governors noted in a communiqué following their meeting in Ankara in September 2015 that the success, or otherwise, of the project "will be determined by its widespread and consistent implementation."

The communiqué therefore called on the OECD to prepare a framework by early 2016 with the involvement of interested non-G20 countries and jurisdictions, particularly developing economies, to participate on an equal footing.

BEPS Minimum Standards

As Associate members under the Inclusive Framework, signatory jurisdictions will implement and support the review of the four BEPS minimum standards, on harmful tax practices, tackling tax treaty abuse, country-by-country (CbC) reporting, and improvements to cross-border tax dispute resolution mechanisms. These Minimum Standards are briefly summarized below.

Action 5: Counter Harmful Tax Practices More Effectively

Currently, governments are most concerned with preferential regimes, such as patent box regimes and advance tax rulings. These can be used by companies to artificially shift profit, and there are concerns about a lack of transparency surrounding such tax rulings.  The Action 5 report proposed new tests to ensure that the allocation of income within a preferential regime is supported by sufficient economic substance.

Action 6: Prevent Treaty Abuse

This report addressed “treaty shopping” in particular, whereby taxpayers seek to game countries' double tax agreement networks to obtain tax treaty benefits without properly qualifying for the benefits, either by triangulating investments through one or more territories or by claiming benefits in inappropriate circumstances. Targeted rules are also proposed to tackle other forms of treaty abuse.

Action 13: Transfer Pricing Documentation

The Action 13 report proposed a three-tier standardized approach to transfer pricing documentation, including the introduction of a country-by-country report. Further, countries have agreed to exchange one document to be prepared under the framework — the Master File — which is intended to provide an overview of a group's structure and its financial and tax position.

Action 14: Dispute Resolution Mechanisms

Recognising the importance of removing double taxation as an obstacle to cross-border trade and investment, countries have committed to improve how they resolve treaty-related disputes, primarily by improving the Mutual Agreement Procedure.


While more than 100 jurisdictions are now part of the Inclusive Framework, this doesn’t necessarily mean that changes to national tax regimes will happen in a coordinated fashion. Indeed, a major problem cited by taxpayers about the BEPS project is that measures are being applied inconsistently.

The Inclusive Framework will involve countries peer reviewing each others' efforts to implement the minimum standards and this may bring about greater harmonization and smooth out the edges of some regimes that go beyond what the BEPS project intended. However, for now, those with economic interests across borders will need to remain extra vigilant of how local tax rules are changing.

BEPS Erosion & Profit Shifting A UK Perspective, tax

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