16 December 2016

BEPS refers to tax avoidance strategies adopted by some multinationals whereby profits are shifted from jurisdictions that have high tax rates to low tax locations.

As a result of these perceived tax avoidance techniques, international governments are introducing measures intended to address the apparent flaws in international tax rules. The recommendations of the BEPS Project, led by the Organisation for Economic Cooperation and Development (OECD), are the focus of much of the coordinated activity.

From July 2016, the U.S. Treasury Department and IRS finalised a rule that requires U.S.-based multinational corporations to provide detailed, country-by-country income tax information to the IRS on an annual basis for each country in which they do business.

Under the OECD guidelines for BEPS Action 13, there is a three-tiered approach:

Master file: A high-level report of information relating to the group’s global business operations and transfer pricing policies.

Local file: Individual, country-level transfer pricing reports that demonstrates intercompany transactions.

Country-by-country report: This report includes financial data and other country-by-country information.

For more information, please see the OECD Guidance document on Action 13.