The landscape of international taxation has undergone seismic shifts since the introduction of the Base Erosion and Profit Shifting (BEPS) 2.0 framework by the OECD. Among its most profound implications is the heightened scrutiny on transfer pricing practices within multinational enterprises (MNEs). As tax authorities worldwide tighten their grip on cross-border transactions, compliance has evolved from a box-ticking exercise to a strategic imperative fraught with complexity.

At the heart of BEPS 2.0 lies the fundamental recalibration of taxing rights. The two-pillar solution—comprising global minimum taxation (Pillar Two) and revised profit allocation rules (Pillar One)—has rewritten the playbook for intercompany transactions. Where transfer pricing was once primarily concerned with arm's length documentation, MNEs now grapple with overlapping reporting obligations, country-by-country disclosures, and the looming specter of top-up taxes under the GloBE rules.

The documentation burden has ballooned exponentially. Where a single transfer pricing study might have sufficed for multiple jurisdictions pre-BEPS, companies now face a patchwork of local file requirements, master file obligations, and CbC reporting. Tax authorities increasingly treat discrepancies between these documents as red flags, forcing finance teams to maintain perfect synchronization across hundreds of pages of technical analysis. The introduction of standardized XML reporting formats like the OECD's Schema for the electronic reporting of CbC reports has done little to alleviate the administrative strain.

Perhaps the most treacherous compliance challenge emerges from the conflict between BEPS 2.0 principles and domestic legislation. While 140+ jurisdictions have pledged to implement the OECD framework, adoption timelines and local interpretations vary wildly. Some countries have unilaterally introduced digital services taxes as stopgap measures, while others apply the GloBE rules with idiosyncratic modifications. This creates nightmare scenarios where an MNE's transfer pricing position satisfies BEPS standards in headquarters jurisdictions but triggers penalties in subsidiaries' locations.

Technology infrastructure has become both a solution and a vulnerability. Legacy ERP systems designed for pre-BEPS compliance frequently lack the granularity to capture real-time transactional data across all tax jurisdictions. The shift toward transactional profit split methods—favored under BEPS for highly integrated operations—requires tracking value drivers at a microscopic level. Many MNEs discover their chart of accounts can't isolate R&D expenditure by market or attribute marketing intangibles to specific regions without costly system overhauls.

Dispute resolution mechanisms have simultaneously expanded and complicated under BEPS 2.0. The Mutual Agreement Procedure (MAP) framework now handles more cases than ever, with the OECD reporting a 25% annual increase in initiated procedures since 2020. Yet the average resolution time has stretched beyond 36 months, leaving billions in potential double taxation hanging in limbo. Some MNEs report being caught in circular disputes where one jurisdiction's transfer pricing adjustment automatically triggers another's corresponding adjustment—with neither tax authority willing to concede.

Substance requirements have moved from theoretical to existential. The days of "brass plate" subsidiaries with nominal employees and artificial profit allocations are ending. Tax authorities now demand physical offices, local decision-makers, and payroll commensurate with reported profits. One pharmaceutical giant recently faced penalties when auditors compared its Singapore entity's three employees to the $2.8 billion in profits attributed there. Such cases force MNEs to either dramatically restructure operations or accept punitive tax assessments.

The human capital challenge may prove most intractable. BEPS 2.0 compliance requires rare hybrids—professionals fluent in both international tax law and data analytics. Traditional transfer pricing specialists often lack the coding skills to implement APIs for real-time reporting, while IT teams misunderstand tax policy nuances. This skills gap has created a war for talent, with Big Four firms poaching entire transfer pricing teams from MNEs by offering 40% salary premiums.

Looking ahead, the compliance landscape will likely grow more Byzantine before it simplifies. The OECD continues issuing clarifications to the GloBE rules, most recently on the treatment of debt releases and insurance income. Meanwhile, developing nations push for even more aggressive profit reallocations through the UN Model Convention. Smart MNEs are treating BEPS 2.0 not as a compliance exercise but as a catalyst for holistic tax function transformation—integrating transfer pricing with supply chain management, IP strategy, and even HR planning. Those who view it merely as another reporting burden risk both financial penalties and strategic irrelevance.