Base Erosion and Profit Sharing (BEPS) Action Plan: Changes to the International Tax System

In November 2015, Prime Minister Justin Trudeau and the other G20 leaders endorsed the OECD’s package of measures released as part of the base erosion and profit shifting (BEPS) project. The BEPS project, an ambitious plan undertaken jointly by the OECD and G20 to overhaul the global international tax system, culminated in hundreds of pages of recommendations that, if adopted, could have a significant impact on cross-border trade and the competitiveness of Canadian businesses.

In 2019, the OECD published its Programme of Work [PDF] to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalization of the Economy (Program of Work). This Program of Work intends to lead to a global consensus on revisions to the international tax system in an effort to prevent countries from imposing unilateral measures to tax the income of multinationals (particularly those operating highly digitized businesses). The OECD’s Program of Work contains two principal measures: Pillar One, which would allocate additional taxing rights to market jurisdictions (such as by revising the “permanent establishment” nexus for establishing source country taxing rights and revising the “arm’s length” standard for allocating profits), and Pillar Two, which would introduce a global minimum tax to prevent the shifting of profits to low-tax jurisdictions. This Program of Work was endorsed by Canada and other G20 countries and, if adopted globally, will mark a fundamental overhaul of the entire international tax system and could significantly increase taxes and administrative costs of multinational enterprises.

Lawyers in Osler’s leading Tax Group are experts on the complexities of international taxation and understand the challenges of a rapidly changing global economy. Here they offer timely insight into global tax reforms and the ongoing developments of the OECD/G20 BEPS Action Plan.

As the Action Plan unfolds, Osler will continue to provide updates on the impact of the plan initiatives. Continue to visit this page for useful information.

BEPS Actions Implementation - Canada

Please click on Pillar One or Pillar Two below to access additional information and related resources.

Pillar One – Unified Approach

Pillar Two – GloBE Proposal

This chart is an overview of the 15 action items, outputs and resources that we have curated to provide you with detailed information for each action item. Click on an action item below to access the information.

Summary

  • Addressing the Tax Challenges of the Digital Economy.
  • See also Pillar One and Pillar Two.

Output

Report

Selected Resources

Selected Resources

Controlled Foreign Company Rules (CFC Rules)

Summary

Designing Effective Controlled Foreign Company Rules – recommendations to strengthen rules of CFC’s.

Output

Domestic Law

Selected Resources

Summary

Limiting Base Erosion Involving Interest Deductions and Other Financial Payments – common approaches based on best practices for preventing base erosion through the use of interest expense.

Output

Domestic Law/TPG

Selected Resources

Action Item 6: Treaty Abuse

Summary

Preventing the Granting of Treaty Benefits in Inappropriate Circumstances – model treaty provisions and recommendations regarding the design of domestic rules to prevent treaty abuse.

Output

Domestic Law/Model

Selected Resources

Action Item 8-10: Transfer Pricing

Summary

Aligning Transfer Pricing Outcomes with Value Creation – Guidance to assure that transfer pricing outcomes are in line with value creation in relation to intangibles, including hard-to-value ones, to risk and capital, and to other high- risks transactions.

Output

TPG/Model

Selected Resources

Osler is ideally positioned to assist clients facing the seismic shift in the application of transfer pricing rules in Canada and around the world. Read more

Summary

Measuring and Monitoring BEPS – Methodologies to collect and analyse data on BEPS and the actions to address it.

Output

Recommendations/TPG

Selected Resources

Summary

Transfer Pricing Documentation and Country–by–country Reporting- revised guidance on transfer pricing documentation, including the template for country-by-country reporting, to enhance transparency while taking into consideration compliance costs.

Output

Recommendations/TPG

Selected Resources

Osler is ideally positioned to assist clients facing the seismic shift in the application of transfer pricing rules in Canada and around the world. Read more

Resources

Tax planning developments: Important international tax changes

Osler Legal Year in Review 2021 – December, 2021

In 2021, a number of significant changes were proposed for international taxation in Canada. As Canada and the rest of the world look to reshape the international tax system, there will be many new challenges (and potential planning opportunities) for multinational enterprises. Tax planning developments: Important international tax changes - Legal Year in Review 2021

Market reactions of multinationals to the OECD BEPS

SSRN – June 10, 2021

This paper looks at the reactions of multinationals in 36 OECD member states. Significant differences were found in the reactions of U.S. companies compared to European Union corporations. Market reactions of multinationals to the OECD BEPS Action Plan by Matthias Petutschnig, Kristin Resenig