Base Erosion and Profit Shifting

Base Erosion and Profit Shifting (BEPS) refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits between jurisdictions in order to minimise tax liability.

At the request of G20 leaders in June 2012, an OECD/G20 project was launched in order to identify the key issues that lead to BEPS and in 2015 the BEPS Package, made up of a 15-point Action Plan was delivered.

In November 2015 the BEPS package was endorsed by G20 leaders who called on the OECD 'to develop an inclusive framework' in order 'to monitor the implementation of the BEPS project globally.'

In June 2016 the Isle of Man committed to the OECDs BEPS standards and joined the Inclusive Framework which, as of July 2019, comprised of 139 global jurisdictions.

In July 2021 131 members of the Inclusive Framework, including the Isle of Man, joined a high level, two pillar plan to ensure that the largest multinational enterprises (MNEs) pay tax where they operate and earn profits, with the aim of improving the certainty and stability of the international tax system.

In October 2021 136 members of the Inclusive Framework, including the Isle of Man, finalised this high level, two pillar plan and agreed an implementation plan. Further details on this two pillar plan can be found at the link below and on the OECD’s webpage.

Pillar 1 & Pillar 2

BEPS minimum standards

In order to tackle BEPS effectively four minimum standards were identified to:

  • fight harmful tax practices (BEPS Action 5)
  • prevent tax treaty abuse (Action 6)
  • improve transparency with Country-by-Country Reporting (Action 13)
  • enhance the effectiveness of dispute resolution (Action 14)

As a member of the Inclusive Framework the Isle of Man committed to implementing the four minimum standards and further details of how this was achieved can be found at the links below.

Action 5 Exchange of Tax RulingsAction 6 Prevention of Treaty AbuseAction 13 Country-by-Country ReportingAction 14 Mutual Agreement Procedure 

BEPS Action 15 provides an analysis of the tax and legal issues related to the development of a multilateral instrument that enables participating countries to quickly and efficiently modify their network of double tax agreements to address the treaty-specific BEPS concerns including those outlined in the OECD's Action 6 and 14 reports. In addition to the four minimum standards the Isle of Man has also implemented Action 15.

Action 15 Multilateral Instrument

Further information on BEPS and copies of each of the OECDs reports into each action can be found on OECD's BEPS Action page.