- Arm's-length principle
- The long-standing rule that transactions between two entities of the same multinational group should be priced as if the entities were unrelated parties bargaining independently. It works for commodities with market benchmarks but strains for unique intangibles that have no comparable market price.
- Base erosion and profit shifting
- The OECD-coordinated project, launched in 2013, addressing the erosion of national tax bases as multinationals shifted profit toward low-tax jurisdictions. It tightened documentation and disclosure and curbed the most artificial mismatches, but retained the arm's-length architecture and its core weakness.
- Data residency
- A legal requirement that certain categories of data — personal, financial, health, or government records — be stored or processed on servers physically located inside a national border. It is a hard constraint on the physical map that cannot be met by contract, and its weight grows as the tax lever weakens.
- Global minimum tax (the second pillar)
- The OECD-coordinated reform, agreed in outline by well over a hundred jurisdictions around 2021, setting a floor effective rate of roughly 15% on large multinational groups. It changes the payoff of profit shifting rather than the pricing of internal trades.
- Intangible asset
- A non-physical asset such as a patent, trademark, copyright, brand, algorithm, or accumulated know-how. Intangibles carry much of the value in the modern economy, can be legally owned in any jurisdiction, and are central to profit shifting because they resist arm's-length valuation.
- Substance requirement
- A rule that profit attributed to an entity should follow the real people, functions, and decision-making located there, rather than mere legal title held by a shell. It closed the crudest zero-substance structures but sometimes prompted firms to relocate genuine activity to low-tax jurisdictions.
- Top-up tax
- The mechanism giving the minimum tax its bite: when a group's profit in a country is taxed below the floor, another country — primarily the parent's, with backstops elsewhere, or the low-tax jurisdiction itself via a domestic top-up — may collect roughly the shortfall up toward the floor.
- Transfer pricing
- The prices a multinational sets on internal trades between its own subsidiaries — for goods, services, intra-group loans, and the use of intangibles. Because tax is levied entity by entity, these internal prices determine which country gets to tax the resulting profit.