Updated
GL-B-04
Glossary · Taxes and residency
BEPS - OECD rules against shifting profit to low-tax countries
An OECD plan against the erosion of the tax base and the shifting of profit to low-tax jurisdictions. Because of BEPS, requirements for substance, information exchange and structure transparency have grown.
01 / In 30 seconds
The short answer
- What it is
- The OECD plan against base erosion and profit shifting to offshore jurisdictions
- Against what
- Artificial shifting of profits to low-tax jurisdictions
- What it strengthened
- Requirements for substance, exchange of information, transparency
- Who it concerns
- International structures and companies
- Can you prepare
- Yes: build the structure with real presence and transparently
02 / In plain words
What BEPS means
BEPS (base erosion and profit shifting) is the OECD plan against the erosion of tax bases and the shifting of profits. Put simply: it targets schemes where a company earns in one country but artificially shifts its profit to where tax is lower or non-existent — through fictitious structures and “paper” companies.
BEPS changed the rules of the game for international business. Because of it, the requirements for real presence (substance) have grown: a preferential regime is for those who genuinely do business there. The automatic exchange of tax information between countries has intensified (CRS grew out of the same logic), and transparency of structures and disclosure of beneficial owners have become the norm.
The conclusion for the client: aggressive “profit offshore with no presence” schemes no longer work safely. A foreign structure today is built with real substance, transparent ownership and regard for CFC rules — otherwise tax savings turn into additional assessments and reputational risk.
A case from practice
An owner wants to route profit through a company in a low-tax jurisdiction. In the BEPS era, without a real office and employees this is dangerous: under CFC rules their country of residence will tax the profit on them, and the exchange of information will make the structure visible. The solution is real substance and transparency.
Who BEPS concerns
- International companies and holdings
- Low-tax structures
- Tax planning
- Substance requirements
- Exchange of information (CRS)
- Transparency of ownership
03 / What it covers
What BEPS changed
Substance
- Real presence
- Against shells
- Reliefs for real business
Transparency
- Disclosure of beneficial owners
- Reporting
- Against anonymity
Exchange
- Automatic exchange (CRS)
- Between countries
- Less secrecy
Bottom line
- Schemes without presence are at risk
- CFC rules
- Additional assessments
04 / How it works
How to build a structure in the BEPS era
Assess the goal and jurisdiction
Why the structure exists and where it is needed.
Ensure real substance
Office, staff and decisions in the company's country.
Disclose ownership transparently
The beneficial owner is disclosed to banks and registers.
Take account of CFC rules and exchange
We check the owner's CFC rules and data exchange.
A lawful and sustainable structure
The structure withstands tax audits.
05 / Key facts
What you need to know
01What it is
An OECD plan
Against schemes where profit is earned in one country and moved via paper companies to where there is no tax.
02Substance
Real presence
A preferential regime goes to those who actually run the business there: office, people, decisions.
03Transparency
Data exchange and registers
Automatic exchange of tax information (CRS) and disclosure of beneficial owners have become the norm.
04Bottom line
Schemes without presence are risky
Offshore profit without substance leads to extra tax and reputational risk.
Common mistakes
Building a structure without substance
Provide office, people and management where the company enjoys the relief.
Counting on anonymity
Assume the beneficial owner is visible to registers, banks and tax authorities.
Ignoring CFC rules in the owner's country
Check how the company's profit is taxed where the owner lives.
06 / Expert advice
How to prepare in advance
A foreign structure today is built with BEPS in mind: with real presence (substance) where needed, transparent disclosure of ownership and an eye on the CFC rules of the country of residence. That way tax savings remain lawful and sustainable rather than turning into a risk of additional assessments and reputational losses.
What we do for you. BRIDGES GLOBAL builds structures with BEPS in mind: real presence where needed, transparent ownership and an eye on CFC rules. That way tax savings remain lawful and do not turn into additional assessments when the data become visible anyway.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
The OECD plan against schemes in which profit is artificially shifted from the country where it is earned to a low-tax jurisdiction through fictitious structures. It made such schemes risky.
It sharply strengthened the requirements for real presence (substance) and transparency. Simply registering an offshore company with no activity no longer gives safe savings.
Yes, they come from the same logic of transparency. CRS — the automatic exchange of tax information — grew out of the same efforts to make income visible to tax authorities.
A company’s real presence: an office, employees, management on the spot. BEPS requires that a preferential regime go to those who genuinely do business there.
Directly it concerns businesses and structures, but through CFC rules and exchange of information it also affects owners: their foreign companies become visible and taxable.
With real substance, transparent ownership and regard for the CFC rules of the country of residence. Then the savings are lawful and sustainable rather than turning into additional assessments.
INITIAL ASSESSMENT
Tell us what outcome your family needs
We will design a solution for your case, choose the country and the right status, and take the whole process through to the result.
