BEPS guidelines of OECD to be implemented in India from 1 April 2016

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Who: BEPS guidelines
What: To be implemented in India
When: From 1 April 2016

BEPS: Base Erosion and Profit Shifting

The term BEPS is an acronym of Base Erosion and Profit Shifting and it was in news in the third week of January 2016 as India decided to implement these guidelines.

BEPS refers to tax planning strategies that would exploit the gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

These norms were announced by Organization for Economic Cooperation and Development (OECD) in October 2015 to close tax loopholes that it estimated cost countries upwards of 100 billion US dollars a year.

With the implementation of these guidelines, it will become mandatory for Indian multinationals to make country-by-country reporting to follow guidelines from the financial year that begins on 1 April 2016.

It will impact all Indian companies with significant cross-border operations and with annual consolidated global revenue of more than 5500 crore rupees.

BEPS will be major significance for developing countries like India, as they strongly rely on corporate income tax and in particular from multinational enterprises (MNEs).