Module IV·Article II·~1 min read
BEPS: Combating Tax Avoidance at the International Level
International Taxation and BEPS
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What is BEPS
BEPS (Base Erosion and Profit Shifting) — the erosion of the tax base and the shifting of profits. Strategies that allow transnational corporations to pay unjustifiably low taxes. According to OECD estimates, annual losses to budgets amount to $100–240 billion.
Classic schemes: “Double Irish with Dutch Sandwich” (Apple); routing royalties to low-tax jurisdictions; artificially creating PE in low-tax countries.
15 BEPS Actions
The OECD initiated a plan consisting of 15 actions to combat BEPS:
Action 1: taxation of the digital economy (Pillar One and Two)
Action 2: hybrid instruments and structures
Action 3: CFC (Controlled Foreign Corporation) rules
Action 5: harmful tax practices (Patent Box)
Action 6: abuse of tax treaties (treaty shopping)
Action 7: artificial avoidance of PE
Actions 8-10: transfer pricing
Action 13: Country-by-Country Reporting (CbCR)
Action 15: MLI (multilateral instrument for rapid modification of thousands of tax treaties)
Pillar Two: Global Minimum Tax of 15%
The G20/OECD agreed on a global minimum corporate tax rate of 15% for companies with revenue >€750 million. Comes into force in 2024–2025 in most EU countries. Mechanism: if the source country taxes at a rate below 15%, the home country of the parent company “tops up” the tax (Income Inclusion Rule).
Consequence: the end of “zero” rates for large MNEs. UAE: introduced a 9% rate starting 2023, partly in response to Pillar Two.
Practical Assignment
A large European company (revenue €2 billion) transfers royalties for the use of a trademark to an Irish subsidiary. The Irish subsidiary pays 12.5% tax. How will Pillar Two change the tax burden of the group? What can be done to adapt?
§ Act · what next