The BEPS Initiative: What TP Teams Must Know (2026)

BEPS — Base Erosion and Profit Shifting — was the OECD/G20 programme that rebuilt the international transfer-pricing toolkit in 2013-2015. Its 15 actions changed what documentation must contain, how intangible profits are allocated, how minimum taxes interact with TP, and how countries exchange data. For a TP team, BEPS is not history: the three-tier documentation it created is the format every audit now expects, and the intangibles refinements (DEMPE) are the live law in every intangibles dispute.

The 15 actions at a glance

Action	Theme	TP relevance
1	Tax challenges of digitalisation	Amount A/B, user-participation theories (evolving)
2	Neutralising hybrid mismatch arrangements	Hybrid entities in groups
3	CFC rules	Profit location
4	Abusive treaty practices	Treaty routing structures
5	Harmful tax practices	—
6	Treaties not generating treaty benefits	PE and treaty shopping
7	Artificial avoidance of PEs	PE rules for intra-group support and sales preparation
8-10	Aligning TP outcomes with value creation	DEMPE, risk allocation, intangibles valuation, HTVI
11	Measuring and monitoring	Data flows
12	Risk indicators	Audit targeting (CbCR-driven)
13	Transparency — three-tier documentation	Local File, Master File, CbCR
14	Effective dispute resolution	MAP modernisation
15	Multilateral Convention	Implementing Actions 6, 9, 10, 13, 14

The actions that change daily work

Action 13 — the documentation architecture. This is the one every TP team feels. BEPS replaced “write a study when an audit comes” with a fixed three-tier structure:

• Local File — entity-level: business overview, FAR, transactions, methods, comparables, financials. India: Rule 10D.
• Master File — group-level: structure, activities, intangibles, financial and tax positions. India: Rule 10E.
• CbCR — jurisdictional financial and tax data for the ultimate parent, exchanged automatically between tax authorities. India: Rules 10DA/10DB.

The design principle — contemporaneous, standardised, and cross-consistent — is now universal. A Local File that contradicts the Master File is a self-inflicted audit trigger.

Actions 8-10 — intangibles and DEMPE. Before BEPS, “who owns the intangible” was often answered by contract. BEPS answered by DEMPE — Development, Enhancement, Maintenance, Protection and Exploitation — with the profit following the entity that contributes to and controls the risk of the DEMPE functions. The companion rules: residual profit to the entrepreneurial contributor; HTVI (hard-to-value intangibles, Ch. 5.51-5.55) as a simplified route for pre-development IP. For Indian groups licensing IP into captive units, the post-BEPS question is always: where is DEMPE actually performed, and who controls the risk?

Action 7 — PEs via intra-group support. Sales-preparation and ancillary activities done by related entities can create a PE in the performing entity’s jurisdiction. The practical effect: intra-group service flows need both a TP test and a PE test.

Actions 5/6/12 — mostly structural (CFCs, hybrids, audit risk scoring), but Action 12’s risk indicators are why CbCR data quality is now a TP issue, not just a reporting one: the ratios that feed risk scoring are the same ratios your benchmarking produces.

India’s implementation

BEPS element	Indian position
Three-tier documentation	Implemented — Rule 10D (local, pre-existing, tightened), Rule 10E (master), Rule 10DA/10DB (CbCR)
DEMPE / intangibles	Adopted via Guidelines 2017/2022 alignment; reflected in TPO and ITAT practice on intangibles
CbCR exchange	India is a signatory to the MLC; automatic exchange is live
CFC rules	s.91(2) (introduced 2017)
Hybrid mismatches	s.91(3) / s.94(7)
PE via intra-group support	s.5(1A) mirrors the BEPS PE rules
Pillar Two / GloBE	Implementation under progress (see the Pillar Two section)

India’s s.92 framework predates BEPS, which is why Indian documentation is BEPS-shaped on top of a domestic skeleton: the local file must satisfy Rule 10D’s 13 items and read as the BEPS local file an exchange partner expects.

What BEPS means operationally for a TP team

1. Document once, use everywhere — the FAR profile, comparables and financial data are shared exhibits across Local File, Master File, 3CEB and CbCR. Inconsistency between them is the most common self-inflicted wound.
2. DEMPE before pricing — for any intangibles flow, the DEMPE analysis precedes the method choice; the method follows the function.
3. CbCR is a TP input — the entity-level numbers must reconcile to the benchmarking and the accounts; a CbCR that doesn’t reconcile to the Local File is a risk indicator waiting to fire.
4. Contemporaneity is the rule, not a tactic — penalty protection (India 282BA/282BC) and credibility both require documentation that existed before the assessment, not reconstructed for it.

The documentation pillar guide covers the three-tier structure in full; the Pillar Two section covers the next generation of the same project — the global minimum tax.