Base Erosion Profit Shifting (BEPS)

The Organisation for Economic Co-operation and Development’s (OECD) Inclusive Framework on Base Erosion Profit Shifting (BEPS) 1.0 (referring to Pillar 1) was introduced to allocate more taxing rights to countries where multinational enterprises (MNEs) have significant consumer-facing activities and generate profits, regardless of physical presence. There were loopholes and mismatches in tax rules that were resolved with BEPS 1.0 in the early 2010s.

Fast forward to today, the digitalisation of the economy requires new definitions and rules to address the transformative nature of how business is conducted, resulting in a Two-Pillar solution that formed the foundation of BEPS 2.0, or Pillar 2. This Pillar continues to evolve with new initiatives, focusing on establishing a global minimum tax and an overall modernisiation of international tax rules to better fit the realities of the digital economy.

Comparing BEPS 1.0 and BEPS 2.0

As MNEs navigate the complex roadmap of implementing global minimum taxes, there are several impacts that they will have to consider:

• Impact on profitability (due to tax optimisation)

• Compliance costs

• Recalibration of internal processes and restructuring operations

• Ensuring accurate calculations for new tax obligations

How we help you navigate BEPS 2.0

Along with new demands for internal resources to manage the impact, there’s a need to revamp existing tax policies and incorporate new technologies to handle new and greater compliance obligations, bringing greater accuracy and efficiency across tax and finance functions.