CA Anjan Prasad S

What is BEPS?

♥ Base erosion and profit shifting (BEPS) is a technical term referring to the negative effect of multinational companies’ tax avoidance strategies on national tax bases. BEPS can be achieved through the use of transfer pricing.

♥ BEPS is used in a project headed by OECD (Organization for Economic Co-operation and Development).

♥ BEPS is said to be an “attempt by the world’s major economies to try to rewrite the rules on corporate taxation to address the widespread perception that the corporations don’t pay their fair share of taxes.

The BEPS Project involves input from the 34 member countries of the OECD, all G20 members, and more than 40 developing countries. Since India is part of G20 Nations, BEPS is applicable to India.

What are BEPS Objective?

The objective of the BEPS Project is to close gaps in international tax rules, effectively eliminating or substantially reducing BEPS; and to secure government revenues by ensuring that profits are taxed in the jurisdiction where the economic activities generating such profits are performed and where value is created.

To achieve the above objective, the OECD has come up with 15 Action Plans, and India has in the Budget 2016 implemented few of those action plans which are as follows:

Sl. No.

Action Plans

Implementation by India in Budget 2016
1The digital economyNew 6% Equalization Levy on Digital Transactions. Levied @ 6% service provided by Non-resident
2Hybrid mismatch arrangements 
3Controlled foreign companies (CFC) regimes 
4Financial payments 
5Harmful tax practicesConcessional tax regime for income from patents @ 10%
6Treaty abuseApplicability of General Anti Avoidance Rules (“GAAR”) provisions of GAAR would applicable from 1st April 2017
7Permanent establishment (PE) status 
8Transfer pricing and intangibles 
9Transfer pricing and risks/capital 
10Transfer pricing and other high risk transactions 
11Data and methodologies 
12Disclosure of aggressive tax planning 
13Transfer pricing documentationIntroduction of Country-by-Country (“CbC”) reporting requirements
14Dispute resolution mechanisms 
15A multilateral instrument 

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  • Mahendra Bagrecha

    Equalisation levy is applicable on services provided by a non resident or to a non resident..?

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