Base Erosion Profit Shifting (BEPS)

Journeying from BEPS 1.0 to BEPS 2.0

The Organisation for Economic Co-operation and Development’s (OECD) Inclusive Framework on Base Erosion Profit Shifting (BEPS) 1.0 (referring to Pillar 1) was introduced to allocate more taxing rights to countries where multinational enterprises (MNEs) have significant consumer-facing activities and generate profits, regardless of physical presence. There were loopholes and mismatches in tax rules that were resolved with BEPS 1.0 in the early 2010s.

Fast forward to today, the digitalisation of the economy requires new definitions and rules to address the transformative nature of how business is conducted, resulting in a Two-Pillar solution that formed the foundation of BEPS 2.0, or Pillar 2. This Pillar continues to evolve with new initiatives, focusing on establishing a global minimum tax and an overall modernisiation of international tax rules to better fit the realities of the digital economy.

Comparing BEPS 1.0 and BEPS 2.0

Pillar One	Pillar Two
New nexus and profit allocation rules, aiming to allocate a larger portion of taxing rights over global business income to market countries.	Rules for a new global minimum tax, endorsed in December 2021 by 141 jurisdictions participating in the BEPS 2.0 project.

Andy Baik

Partner, Co-Head of BEPS COE and Head of US Tax Desk

KPMG in Singapore

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Harvey Koenig

Partner, Co-Head of BEPS COE and Energy & Natural Resources and Telecommunications, Media & Technology, Tax

KPMG in Singapore

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Impact of BEPS 2.0

As MNEs navigate the complex roadmap of implementing global minimum taxes, there are several impacts that they will have to consider:

Impact on profitability (due to tax optimisation)

Compliance costs

Recalibration of internal processes and restructuring operations

Ensuring accurate calculations for new tax obligations

Global

Increased tax liabilities due to higher effective tax rates for MNEs overall from Income Inclusion Rule (IIR)

Adjustments in tax planning strategies

Ensure alignment with global tax strategy

Greater global tax transparency and alignment between countries

Local (Singapore)

Considering Singapore as a strategic location & potential adjustments in operations

How we help you navigate BEPS 2.0

Along with new demands for internal resources to manage the impact, there’s a need to revamp existing tax policies and incorporate new technologies to handle new and greater compliance obligations, bringing greater accuracy and efficiency across tax and finance functions.

Be Pillar Two-Ready Guide

Navigate Pillar Two by first understanding what it entails.

Download the guide to learn about the key aspects and implications of Pillar Two under the OECD's BEPS framework, focusing on global tax reform and its impact on multinational enterprises.

Tax Reimagined Approach

We combine technology, transformation and compliance capabilities under a new framework – develop and implement a customised target operating model for your tax and finance functions.

The end goal of this technology-enabled holistic approach is to reduce costs, mitigate risks, improve quality and drive more strategic value across your organisation.

KPMG’s BEPS Automation Technology (KBAT)

Our KBAT tool covers the end to end Pillar 2 compliance process. It utilises advanced technological solutions, data analytics, artificial intelligence, and automation tools, to streamline compliance processes, enhance accuracy in reporting, and mitigate risks associated with BEPS-related tax challenges.

Download our guide