Base Erosion and Profit Shifting (BEPS) refers to tax avoidance strategies that multinational companies use to shift profits from high-tax jurisdictions to low-tax jurisdictions, thereby eroding the tax base of the higher-tax countries.
BEPS encompasses various practices that exploit gaps and mismatches in tax rules to artificially shift profits to locations where there is little or no economic activity. This can include strategies such as transfer pricing manipulation, where companies set prices for transactions between their subsidiaries in different countries to reduce taxable income in higher-tax areas.
The OECD (Organisation for Economic Co-operation and Development) has developed a set of recommendations aimed at curbing BEPS, which includes measures to improve transparency, enforce compliance, and ensure that profits are taxed where economic activities occur.
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