The BEPS actions are a package of 15 measures developed by the OECD and G20 between 2013 and 2015 to close the international tax gaps that let multinationals shift profits to jurisdictions where they have little real activity.1OECD. Action Plan on Base Erosion and Profit Shifting Four of the 15 are binding minimum standards that every member of the Inclusive Framework has committed to implement and to review each other on; the remainder are best-practice recommendations countries can adopt as they see fit. More than 145 jurisdictions now participate.2OECD. Base Erosion and Profit Shifting The OECD estimates the underlying revenue loss at $100 to $240 billion a year.3OECD. Information Brief – Base Erosion and Profit Shifting
The Four Minimum Standards
Four of the actions carry a different weight from the others. Inclusive Framework members have agreed to implement them and to be peer-reviewed on how they do so.2OECD. Base Erosion and Profit Shifting
Action 5 — Harmful tax practices. Preferential regimes such as patent boxes are permitted only where the income benefiting from the reduced rate has a real link to the substantial activity that generated it. A taxpayer claiming a lower rate on patent income, for example, must have performed the underlying research and development itself. Action 5 also requires the spontaneous exchange of certain tax rulings between jurisdictions, so a favorable private ruling in one country cannot stay hidden from other affected tax authorities. The OECD’s Forum on Harmful Tax Practices reviews members’ regimes on an ongoing basis.
Action 6 — Treaty abuse. Every covered tax treaty must state in its preamble that the parties intend to eliminate double taxation without creating opportunities for non-taxation or avoidance, and must include at least one substantive anti-abuse rule.4OECD. Preventing Tax Treaty Abuse Most jurisdictions use the Principal Purpose Test, which denies a treaty benefit if obtaining it was one of the principal purposes of the arrangement. Some supplement or replace it with a Limitation on Benefits clause, which uses objective criteria such as ownership, business activity, and public trading status rather than a subjective look at motive.
Action 13 — Country-by-country reporting. Multinational groups with consolidated revenue of €750 million or more file a standardized annual report showing, for each jurisdiction they operate in, their revenue, profit, taxes paid and accrued, employees, and stated capital.5OECD. Guidance on the Implementation of Country-by-Country Reporting – BEPS Action 13 The report sits alongside two other documents: a Master File giving a global overview of the group and a Local File covering each local entity’s transactions. Tax authorities use the country-by-country data as a risk-assessment tool. Large profits booked in a country with few employees and minimal assets stand out.
Action 14 — Dispute resolution. When two countries both try to tax the same income, the mutual agreement procedure is the treaty mechanism for resolving the conflict. The Action 14 standard sets out 21 elements and 12 best practices that a jurisdiction’s MAP framework must meet, and members must publish MAP profiles and statistics on case volumes and resolution times.6OECD. Dispute Resolution in Cross-Border Taxation Some jurisdictions go further and adopt mandatory binding arbitration when the two tax authorities cannot agree within a set timeframe.
The Other 11 Actions
The remaining actions are recommendations. Countries adopt them according to their own circumstances, though many have become de facto standards through peer pressure and EU legislation. They fall into three groups by what they are trying to fix.
Coherence Between Tax Systems
Action 1 — The digital economy. Action 1 identified the tax challenges of highly digitalized businesses that can serve a country’s customers without any physical presence there. It did not deliver a rule set of its own; instead it framed the problem that eventually became Pillars One and Two.
Action 2 — Hybrid mismatches. A hybrid mismatch happens when a payment, entity, or instrument is treated one way in one country and differently in another, producing a deduction with no matching taxable income, or the same expense deducted twice. The recommendation neutralizes the outcome: the country granting the deduction denies it when the corresponding income escapes tax, or the other country pulls the income in.7OECD. Hybrid Mismatch Arrangements – Corporate Tax Statistics
Action 3 — Controlled foreign company rules. CFC rules stop a parent company from parking income in a low-tax foreign subsidiary and deferring tax indefinitely. Action 3 provides a framework for designing them, covering which entities and income to target, how to compute the income, and how to avoid double taxation on repatriation.
Action 4 — Interest deductions. Without limits, a group can load a subsidiary in a high-tax country with intercompany debt while the interest income surfaces somewhere lightly taxed. The recommended fix caps net interest deductions at a fixed percentage of EBITDA, with the OECD suggesting a corridor between 10% and 30%.8OECD. Limiting Base Erosion Involving Interest Deductions and Other Financial Payments – Action 4 A group ratio rule can permit higher deductions where overall group leverage justifies them.
Substance: Taxing Profit Where Value Is Created
Action 7 — Permanent establishment. Before BEPS, multinationals could structure local operations to stay just under the threshold that triggers taxable presence, using commissionaire arrangements or splitting activities across entities so each piece fit inside an exemption. Action 7 rewrites those tests to close the workarounds.
Actions 8, 9, and 10 — Transfer pricing. Transfer pricing has been the most common vehicle for profit shifting. These three actions overhauled the arm’s length principle so that profits follow the entity that actually controls economically significant risks and has the financial capacity to bear them. A subsidiary that assumes risk on paper without performing the control functions no longer keeps the associated profits. For hard-to-value intangibles, such as newly developed patents, tax authorities can now use actual outcomes as evidence that the original transfer price was reasonable, and reassess the price if the intangible ends up generating much higher returns than projected.9OECD. Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles The taxpayer can rebut this by showing the initial valuation was reasonable given what was known at the time.
Action 11 — Measuring BEPS. Action 11 set out methods and data sources for measuring the scale of base erosion and profit shifting and for monitoring the impact of the countermeasures.
Transparency
Action 12 — Mandatory disclosure. This action encourages countries to require taxpayers, and often their advisors, to report aggressive tax planning arrangements to the authorities early, while a scheme is still being marketed rather than years later during an audit. Early information lets a government legislate the loophole shut or open targeted examinations before losses accumulate.
Action 13, covering country-by-country reporting, sits with the minimum standards above. Action 14 on dispute resolution likewise.
Action 15 — The Multilateral Instrument. The instrument that lets the treaty-based BEPS measures actually take effect without renegotiating thousands of bilateral treaties one at a time.
How Treaty Changes Get Delivered: The MLI
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS, known as the MLI, is the vehicle Action 15 produced.10OECD. BEPS Multilateral Instrument A single instrument modifies existing bilateral treaties in one step. It works through matching: a treaty is amended only when both parties have signed and ratified the MLI and both have listed that treaty as a Covered Tax Agreement. Countries can reserve on individual provisions, so the practical effect varies from treaty to treaty. As of the most recent data, 107 jurisdictions have signed or joined, and the MLI reaches roughly 1,950 bilateral treaties.11OECD. Signatories and Parties – BEPS MLI Positions
The MLI carries the treaty pieces: the anti-treaty-shopping provisions from Action 6, the permanent establishment changes from Action 7, elements of Action 14. Actions that require changes to domestic law, such as interest limitations and hybrid mismatch rules, arrive through national statutes instead.
What Came After: Pillars One and Two
The original 15 actions did not fully resolve the tax challenges of highly digital businesses, and that unfinished work led to a second phase, sometimes called BEPS 2.0. It sits alongside the original actions rather than replacing them.
Pillar One — Amount A creates a new taxing right for market jurisdictions, meaning the countries where customers are located. It applies only to multinationals with global revenue above €20 billion and profitability above a 10% margin.12OECD. Progress Report on Amount A of Pillar One Fact Sheet For qualifying groups, 25% of profit above that 10% line is reallocated to market jurisdictions based on where revenue is sourced.13OECD. Multilateral Convention to Implement Amount A of Pillar One Overview Extractive industries and regulated financial services are excluded. The revenue threshold is expected to drop to €10 billion after a seven-year review, contingent on successful implementation. Amount A requires its own Multilateral Convention to take effect, and as of early 2025 that convention was not yet open for signature.14OECD. Multilateral Convention to Implement Amount A of Pillar One
Pillar One — Amount B takes a different approach. Rather than creating a new taxing right, it standardizes the transfer pricing analysis for routine marketing and distribution activities, cutting compliance costs for both taxpayers and administrations, with a particular focus on low-capacity countries. The guidance is now part of the OECD Transfer Pricing Guidelines, and jurisdictions can choose whether to apply it.15OECD. Pillar One – Amount B
Pillar Two sets a 15% global minimum effective tax rate for multinational groups with consolidated revenue of €750 million or more.16OECD. Pillar Two Model Rules in a Nutshell Where the group’s effective rate in a jurisdiction falls below 15%, a top-up tax fills the gap. The Global Anti-Base Erosion (GloBE) rules decide which country collects it, through a coordinated sequence: a Qualified Domestic Minimum Top-up Tax lets the low-tax country itself collect first; if it does not, the Income Inclusion Rule pushes the top-up up the ownership chain to the parent’s jurisdiction; the Undertaxed Profits Rule sits underneath both as a backstop for other jurisdictions where the group operates.17OECD. Global Anti-Base Erosion Model Rules (Pillar Two) A substance-based income exclusion carves out a portion of income tied to real payroll and tangible assets, so the minimum tax does not fall on genuine productive investment.18OECD. FAQs – Global Anti-Base Erosion Model Rules
A separate treaty-based provision, the Subject to Tax Rule, lets a source country impose additional tax on certain cross-border payments to related parties, including interest, royalties, service fees, insurance premiums, and payments for distribution rights, when the recipient’s nominal rate is below 9%.19OECD. Subject to Tax Rule – Pillar Two It matters most for developing countries that gave up withholding tax through treaty negotiations.
Where Implementation Stands
Pillar Two has moved faster than any other piece. Dozens of countries enacted GloBE legislation with the IIR and QDMTT taking effect for fiscal years beginning on or after December 31, 2023, in the first wave: EU member states, the United Kingdom, Canada, Australia, South Korea, and Japan. The UTPR followed in most of those jurisdictions a year later. Several jurisdictions that previously had no corporate income tax, including Bahrain and the Bahamas, enacted domestic minimum top-up taxes to keep the revenue at home rather than see it collected by parent-company jurisdictions.
The United States has taken a different route. In 2025, the U.S. Treasury announced it had secured an agreement within the Inclusive Framework to exempt U.S.-headquartered companies from Pillar Two’s requirements, with those companies remaining subject only to U.S. global minimum taxes.20U.S. Department of the Treasury. Treasury Secures Agreement to Exempt U.S.-Headquartered Companies The United States has not enacted GloBE legislation. U.S. multinationals remain subject to the U.S. global intangible low-taxed income (GILTI) regime, while other countries applying the UTPR may still look to collect top-up taxes on low-taxed U.S. income in their own jurisdictions.
Amount A of Pillar One remains stalled. Its Multilateral Convention was not open for signature as of early 2025, with a small number of jurisdictions still holding outstanding disagreements.14OECD. Multilateral Convention to Implement Amount A of Pillar One The longer that stays true, the more pressure builds on individual countries to keep or introduce unilateral digital services taxes.