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 |
| 1 | The digital economy | New 6% Equalization Levy on Digital Transactions. Levied @ 6% service provided by Non-resident |
| 2 | Hybrid mismatch arrangements | |
| 3 | Controlled foreign companies (CFC) regimes | |
| 4 | Financial payments | |
| 5 | Harmful tax practices | Concessional tax regime for income from patents @ 10% |
| 6 | Treaty abuse | Applicability of General Anti Avoidance Rules (“GAAR”) provisions of GAAR would applicable from 1st April 2017 |
| 7 | Permanent establishment (PE) status | |
| 8 | Transfer pricing and intangibles | |
| 9 | Transfer pricing and risks/capital | |
| 10 | Transfer pricing and other high risk transactions | |
| 11 | Data and methodologies | |
| 12 | Disclosure of aggressive tax planning | |
| 13 | Transfer pricing documentation | Introduction of Country-by-Country (“CbC”) reporting requirements |
| 14 | Dispute resolution mechanisms | |
| 15 | A multilateral instrument |
(Author can be reached at anjanprasadca@gmail.com)
Equalisation levy is applicable on services provided by a non resident or to a non resident..?