Compliance
Global BEPS Action 5: How to Stay Compliant with the New Transparency Requirements
Preferential regimes are under increasing scrutiny—understand BEPS Action 5 updates and how your structures may need to adapt.
By NomadicTax Research Team • 5-8 min read • August 10, 2026
## The Evolution of BEPS Action 5
BEPS Action 5, managed by the OECD inclusive framework, focuses on identifying and reforming **harmful preferential tax regimes**—particularly those in low or nominal tax jurisdictions—and enhancing transparency through mandatory exchange of taxpayer-specific rulings. ([oecd.org](https://www.oecd.org/en/topics/harmful-tax-practices.html?utm_source=openai))
In **July 2026**, the Inclusive Framework published updated conclusions on the peer review of preferential regimes and **revised the transparency framework’s assessment methodology** (especially the XML schema for exchanging tax rulings). ([oecd.org](https://www.oecd.org/en/topics/harmful-tax-practices.html?utm_source=openai))
## Compliance Categories & What changed
| Regime Type | Prior Rules | What’s New | Implications |
|---|---|---|---|
| Preferential Regimes in No/Only Nominal Tax Jurisdictions | Subject to “substantial activities requirements” and peer review under Action 5 | Updated peer reviews launched for older regimes; some criteria refined to assess qualifying substance. ([oecd.org](https://www.oecd.org/en/topics/harmful-tax-practices.html?utm_source=openai)) | Structures in jurisdictions with light substance risk being reclassified as harmful—may lead to assessments, loss of treaty benefits or increased audits |
| Exchange on Tax Rulings (ETR) | Rulings could be confidential with limited standardization | Revised XML schema and user guide to standardize info exchange; new assessment and monitoring of effectiveness starting 2026 ([oecd.org](https://www.oecd.org/en/topics/harmful-tax-practices.html?utm_source=openai)) | Additional compliance for advisory practices and for companies relying on tax rulings; early adoption can reduce risk |
## What Companies Should Do Now
- **Inventory preferential tax regimes**: Identify any regimes your company uses, especially in low-nominal tax jurisdictions, and assess if they meet new substance requirements (e.g. payroll, tangible asset presence, economic activity).
- **Review rulings and documentation**: Ensure all taxpayer-specific rulings are well documented, follow standard templates, and that you are ready for XML-based exchange requests.
- **Engage with advisers early**: Confirm with tax counsel or advisors whether your structures need adjustments; if possible, seek new rulings or amend existing ones to comply with minimum standards.
## Example Scenario
Imagine an MNE with a holding structure in a jurisdiction like Jurisdiction X, where corporate tax is low and substance has historically been limited. Under revised Action 5 rules:
- Its preferential regime may be considered harmful if substance is lacking. That could lead to loss of treaty benefits, forced redistribution of profits, or inclusion in the harmful regimes reporting map.
- If Jurisdiction X recently issued a ruling in favor of the MNE, that ruling will now need to be formatted to comply with standard schema for exchange and transparency. Failure could result in adverse scrutiny by both domestic and foreign authorities.
## Risk Areas & Mitigations
- **Regimes Being Declared Harmful**: Do due diligence on whether jurisdictions you use for tax planning have had regimes abolished or reclassified.
- **Disclosure Obligations & Exchange of Information**: Ensure data systems can produce the necessary rulings and that consent and forms align with new XML standards.
- **Double Taxation Risk**: Monitor how treaty benefits are impacted if a regime is found harmful—double taxation relief may require alternative strategies.
**Key takeaway**: BEPS Action 5 is no longer optional—it affects both jurisdictions and businesses globally. Early review and alignment with updated substance and transparency standards will help manage audit risk and maintain treaty protections.