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The BEPS Project aims to provide governments with clear international solutions for fighting corporate tax planning strategies that exploit gaps and loopholes of the current system to artificially shift profits to locations where they are subject to more favorable tax treatment. BEPS includes fifteen actions the core contents are analyzed below.
(1) Digital Economy
Based on the characteristics of business model under digital economy, BEPS re-examines the current tax system, tax treaty, and the existing problems in the transfer pricing rules, and suggests adjustments for domestic legislation and international rules.
(2) Hybrid Mismatch Arrangements
Based on the model of tax planning comparing two countries or multinational tax system differences，BEPS proposes adjustments for domestic legislation and international rules.
(3) Controlled Foreign Company Rules
BEPS makes suggestions on how to strengthen the controlled foreign company profits tax rules.
(4) Interest Deduction
Based on the difficulties in claiming the interest deduction and financial instruments, BEPS recommends adjustments for the domestic legislation and international rules. This work coordinates with hybrid mismatch arrangements and controlled foreign company rules.
(5) Unfavourable Tax Practices BEPS takes into consideration preferential tax system of the OECD members and non-members and facilitates different countries to improve or abolish the unfavourable preferential income tax system, putting forward suggestions to solve the issue of unhealthy tax competition at the same time.
(6) The abuse of tax treaty Based on various abuse treatment agreements, on one hand, revise and make clear the tax treaty; on the other hand, make necessary revision to domestic law revision, which can prevent the abuse of tax treaty.
(7) Permanent Establishment BEPS should make a revision to the provision of permanent establishment in tax treaty to mitigate the negative implications.
(8) Intangible Assets, Risk and Capital as well as other High-Risk Transactions BEPS draw up rules to avoid intra-company and associated enterprises’ behavior of tax avoidance through the intangible assets, human distribution of risk and capital transferring profits to the local region.
(9) The Statistical Analysis Build data collection and analysis indicator system, designed for monitoring and early warning indicators of BEPS behavior, conduct analysis to estimate the size and economic impact of BEPS behavior.
(10) Principle of Mandatory Disclosure Helping countries to design disclosure mechanisms for tax planning scheme disclosure mechanisms (including nature of transaction and disclosure of the way, and the information related to the use of sanctions, etc.), to strengthen the supervision of the tax authorities for tax risk management and prevention.
(11) Transfer Pricing Documentation The development of generic template on transfer pricing documentation will improve tax transparency, reduce compliance cost and lighten the burden on taxpayers.
(12) Dispute Settlement The action plan aims to establish a more effective dispute settlement mechanism, to avoid double taxation of cross-border investors.
(13) Multilateral Tool In order to expedite the implementation of the action plan, the results of research to develop a multilateral agreement on the existing terms of the agreement be revised and improved.
