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Base Erosion and Profit Sharing (BEPS)

Base Erosion and Profit Sharing (BEPS)

Better aligning taxation to the location of economic activities.

Better aligning taxation to the location of economic activities.

In October 2015, the OECD released its final recommended actions to implement changes to  the international tax framework to combat BEPS. 

The aim of the project is to better align taxation with the location of economic activities and value creation and to improve information available to tax authorities. 

The back-drop to BEPS is that governments are continuing to cope with the lingering effects of recession and wanting to balance their increased need for revenue with a desire to nurture economic recovery. It has been recognised that multinationals have been able to utilise differences between countries tax laws to their advantage and only coordinated action on a global level will be effective.  

It is important to remember that the actions are not a set of laws but rather agreed recommendations for changes to modernise aspects of international tax. It is expected that the actions will be interpreted and applied differently by countries depending on their current fiscal position and their appetite to attract and retain international business. In addition, many of the actions require further work by the OECD, with varying timelines for delivery. As a result, we are largely in a position of wait and see:


  • When will the actions be implemented; and
  • Which countries will implement the actions.


In the UK, the Diverted Profits Tax (DPT), was introduced in 2015 as a result of the BEPS initiative. Furthermore, the UK has commenced a consultation on interest deductibility and intends to introduce rules to give effect to the BEPS recommendations on hybrids.


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