BEPS
Base Erosion and Profit Shifting
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.
- 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
In plain words
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.
Who BEPS concerns
What BEPS changed
- Real presence
- Against shells
- Reliefs for real business
- Disclosure of beneficial owners
- Reporting
- Against anonymity
- Automatic exchange (CRS)
- Between countries
- Less secrecy
- Schemes without presence are at risk
- CFC rules
- Additional assessments
How to build a structure in the BEPS era
- 01Assess the goal and jurisdiction
- 02Ensure real substance
- 03Disclose ownership transparently
- 04Take account of CFC rules and exchange
- 05A lawful and sustainable structure
What you need to know
- BEPS is the OECD plan against shifting profits offshore
- Because of it, substance requirements have grown
- The automatic exchange of information (CRS) has intensified
- Transparency and disclosure of beneficial owners have become the norm
- “Profit without presence” schemes are no longer safe
Common mistakes
- Building a structure without real substance
- Counting on anonymity offshore
- Ignoring the CFC rules of the owner’s country
- Treating a low tax rate as sufficient in itself
- Not taking automatic exchange of information into account
What this means for a BRIDGES client
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.
Frequently asked questions
01 /What is BEPS, in plain words?
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.
02 /How has BEPS affected offshore jurisdictions?
It sharply strengthened the requirements for real presence (substance) and transparency. Simply registering an offshore company with no activity no longer gives safe savings.
03 /Is BEPS connected with CRS?
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.
04 /What is substance in the context of BEPS?
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.
05 /Does BEPS concern private individuals?
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.
06 /How should a structure be built today?
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.
See also
Read next
This material has undergone editorial review by BRIDGES.
A structure fit for today’s rules?
We will build it with BEPS in mind — real substance, transparency and CFC rules — so that the savings are lawful and sustainable.