BEPS Action 5: Countering Harmful Tax Practices

The BEPS initiative comprises 15 action plans, but only four of them are mandatory for all participating countries, referred to as Minimum Standards. BEPS Action 5 is one of these Minimum Standards, making its impact on international tax far greater than the non-mandatory actions.

BEPS Action 5 is titled Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance. This action focuses on three main areas:

1. Assessing and countering potentially harmful tax regimes in various jurisdictions (hereafter referred to as "locations"). It identifies tax regime features that may facilitate tax avoidance by multinational enterprises (MNEs) and create unfair tax competition.
2. Improving transparency in tax rulings globally through monitoring and peer reviews to prevent companies from exploiting opaque rulings for tax avoidance.
3. Introducing economic substance requirements for jurisdictions with zero or nominal tax rates, ensuring fair competition across the globe.