RSM Australia

Base erosion and profit shifting (BEPS)

Base erosion and profit shifting, or BEPS, is the term given to the observed failure of the current international tax framework, by which BEPS strategies can lead to the 'disappearance' of international profits, and/or the diversion of profits away from the country of value creation to other countries with typically low tax/no tax.

On 5 October 2015, Final Reports were released covering 15 BEPS Actions.  Those reports were formally ‘endorsed’ by the G20 at the Leaders meeting on 15 November 2015, at Antalya, Turkey.

Current status of BEPS action plan

Action 1: Tax challenges of digital economy

10 February 2016: Government introduced Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016.  Will enact tax integrity measures extending GST to digital products and other services imported by consumers (the so-called ‘Netflix tax’).

Action 2: Neutralise hybrid mismatch across borders allowing double non‑taxationBase erosion and profit shifting, or BEPS, is the term given to the observed failure of the current international tax framework

Board of Tax consultation commenced in August and will report in March 2016

Action 3: Controlled foreign company rules

Australia’s CFC rules meet OECD best practice guidance

Action 4: Limit interest deductions

Australia has already tightened its Thin Capitalisation rules

Action 5: Counter harmful tax practices

ATO already implemented exchange of rulings

Action 6: Prevention of treaty-shopping

To be adopted into negotiation of new / updated treaties

Action 7 : Prevent artificial avoidance of permanent establishment

Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill Act became law on 11 December 2015.  The multinational anti-avoidance law (section 177DA) effectively targets global MNC abuse of the permanent establishment threshold.

Other OECD recommendations are in line with Australia’s treaty practice

Action 8, 9 and 10: Transfer pricing and value creation

No fundamental change to Australia’s transfer pricing rules, but enhanced guidance to help ATO’s administration. 

Action 11: Methodologies to collect and analyse BEPS data

Estimate of BEPS problem 4‑10 per cent of global corporate income tax revenue. Further work on methodologies to measure progress required

Action 12: Mandatory disclosure of aggressive tax planning

OECD recommends countries consider adopting disclosure rules. ATO considering costs and benefits for Australia

Action 13: Transfer pricing documentation and country-by-country reporting

Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015 became law on 11 Dec ember 2015 (as noted above).  The Act requires certain global MNC’s to prepare and lodge a Country by Country Report, and a master file and local file in an electronically ‘exchangeable’ format.   

Action 14: Dispute resolution

A number of countries (including Australia) are committed to binding arbitration

Action 15: Multilateral instrument

87 countries (including Australia) working on instrument to quickly update bilateral treaties with BEPS outcomes. To be open for signing by the end 2016

View BEPS Action PLAN TIMELINE

What foreign owners of residential property need to know about lodging their annual return

In late 2017, the Australian Federal Government introduced an annual vacancy fee to be levied on  foreign owners of residential property, where the property is not occupied or generally available on the rental market for at least 6 months in a 12 month period. 

How the PM’s defeat impacts corporate tax rates

Following the proposal for reduced tax rates for corporate entities in 2016, the Treasury Laws Amendment (Enterprise Tax Plan No 2) Bill 2017 (the Bill) was ultimately defeated in the Senate on 23 August 2018 by a vote of 36 to 30. 

Foreign incorporated companies and changes to the tax ruling - What you need to know.

Most will remember the 2016 High Court ruling in the case of Bywater Investments Limited.

Reduced corporate tax rates - what rate of tax will my company pay?

While the legislation is transitioning, some have been left confused about the application of reduced corporate tax rates and the details of eligibility criteria during this state of limbo. To provide some clarity, we take a closer look.

Fringe Benefits Tax – ATO finalise their position on private use of vehicles.

New guidelines for private use exemptions of eligible motor vehicles for Fringe Benefits Tax (FBT) - ATO says yes to making a quick stop to grab a coffee (as long as it doesn’t add more than 2kms to your trip to work and is infrequent) but no to heading to cricket practice after work. 

R&D Tax Incentive Reform - Call for submissions

R&D tax reforms, as announced in the 2018-19 Federal Budget, are steps closer to implementation with the Treasurer and Minister for Jobs and Innovation releasing draft legislation proposed to enact the changes. 

New GST withholding rules - what property purchasers and developers need to know

The Federal Government has passed legislation that will require purchasers of new residential properties to remit the GST directly to the Australian Taxation Office (ATO) as part of settlement. The measures were first announced in last year’s Federal Budget. The legislation specifies: 

Budget falters on R&D tax (and how this impacts startups)

It’s the third budget handed down by Treasurer Scott Morrison and for those of us in the innovation space, a whole lot to digest. After poring over the detail, I’ve created a summary of notable items for your reading pleasure (disclaimer: it’s not all pleasant).

ATO extends lodgement date for Country-by-Country Reporting

The Australian Taxation Office (“ATO”) announced this week an extension of the due date for lodgement of the Country-by-Country report, master file and local file (collectively “CbCR”), from 31 December 2017 to 15 February 2018 for taxpayers with an income year ended on 31 December 2016.

OECD releases revised Transfer Pricing Guidelines

On 10 July 2017, the OECD released its revised OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations  in order to formally incorporate the most significant body of work ever undertaken by the OECD and its member (and indeed some non-member) countries regarding harmful international tax practices – the Base

Signing the Multilateral Instrument

What happens if you threw a party and the guest of honour did not turn up? The international aspects of the G20/OECD’s Base Erosion and Profit Shifting (BEPS) project will become a reality at a treaty signing ceremony to be held in Paris, on 7 June 2017. 

Global Business Reaction to BEPS

Survey reveals impact of BEPS on the middle market. Some have drawn a similarity between OECD’s BEPS (Base Erosion and Project Shifting) project and The Hobbit trilogy, but what exactly is BEPS?

Budget 2016 for International Businesses

Key announcements The Government has announced it will strengthen the anti-avoidance measures for multinationals recently legislated and previously announced in the 2015/16 Federal Budget by introducing the following additional measures:

Budget 2016 for Corporations

Cuts to Company Tax Rate The company tax rate will be reduced to 25% over the next 10 years. The company tax rate will be progressively reduced to 25% between the 2016/17 and 2026/27 income years.

BEPS: New Australian Developments

BEPS Action 2: Board of Tax releases anti-hybrid discussion paper

BEPS: final global sign-off

G20 Leaders endorsement

BEPS project final reports released: OECD calls ‘paradigm shift’

Pascal Saint-Amans, Director of the Centre for Tax Policy and Administration at the OECD, released the 2015 BEPS reports during a global webcast on Monday 5 October 2015.  Consisting of 13 Final Reports and an explanatory statement, the package of measures has been adopted by the OECD Ministerial Council, and must now be adopted by the G20 finance ministers (8 Octo

Multinational anti-avoidance law for real: Australian legislation introduced

In introducing the ‘Combating multinational tax avoidance’ bill to the Australian Parliament on 16 September 2015, the government has taken another unilateral step in its fight against international base erosion and profit shifting (BEPS).  The new bill contains three changes, all of which have been the subject of earlier exposure draft legislation.

Base erosion & profit shifting (BEPS) - Action 7: OECD releases Revised Discussion Draft

Action 7 of the G20/OECD BEPS Project addresses the artificial avoidance of permanent establishment status.  A Revised Discussion Draft (RDD) was released on 15 May 2015, and will be open for public comment until 12 June 2015.  There will be no further public consultations, and the working party will be asked to finalise its recommendations at a meeting on 22-26 Ju

Australia introduces a 'Google tax' after all

Snapshot The proposed multinational anti-avoidance tax integrity measure (Australia’s version of the ‘Google tax’) will:

New major integrity measures announced ahead of 2015-16 Federal Budget

You call that a diverted profits tax? This is a diverted profits tax… Australia’s Federal Treasurer Joe (‘Crocodile Dundee’) Hockey announced on Monday 11 May 2015 that the Federal Budget will contain two new major integrity measures.

Australia changes horses: drops the ‘Google tax’ option but chases the ‘Starbucks effect’

It is ‘silly season’ in Australia at present – that twilight period ahead of the release of the annual Federal Budget, scheduled this year for Tuesday, 12 May 2015. The media is, as usual, awash with speculation regarding what is ‘hot’ and what is ‘not’ in the world of tax.

Practical applications of BEPS Action 13: transfer pricing documentation and country-by-country (CbC) reporting

The organisation for cconomic co-operation and development launched the base erosion and profit shifting (BEPS) project in September 2013 to develop an action plan to standardize and modernize global tax policy.  This is the second in a series of webcasts offering insight and analysis into how the BEPS initiative might be implemented and the effects of that impleme

OECD to hold public consultation on several transfer pricing related BEPS action points

On March 19 and 20 the OECD will hold its public consultation on action points 8, 9 and 10 of the base erosion and profit splitting (BEPS) project. Topics on the agenda include:

Base erosion & profit shifting (BEPS) - OECD webcast 12 February 2015

The OECD’s senior tax leadership delivered a rapid-fire 1 hour webinar from Paris on 12 February, 2015.  The presentation provided an update on BEPS development since late 2014, and outlined the (very heavy) 2015 work program as the BEPS project enters its second and final year.

G20 / OECD BEPS project - the end of the beginning ushers in the beginning of the end game

On 5 October 2015, the OECD has announced it will release the final package of measures for a co-ordinated international approach to the reform of the global tax system under the G20/OECD Base Erosion and Profit Shifting (BEPS) Project.