Tax treaty history in the making
On Wednesday June 7th, 2017, ministers and officials from 68 nations met in Paris to sign the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS(“Multilateral Instrument” or “MLI”). The MLI was developed under Action 15 of the Organisation for Economic Co-operation and Development (OECD) base erosion and profit shifting (BEPS) project, and is the first multilateral treaty of its kind. This is a first ever multilateral instrument capable of amending bilateral tax treaties. No other multilateral tax treaty has sought to amend existing bilateral tax treaties. It has been put in place to create a fairer tax system for all parties around the world, including tax authorities and multinational enterprises.
What is the MLI?
The convention is a crucial landmark for the global tax agenda, as it aims to close loopholes that make BEPS possible. The MLI will enable countries to transpose OECD/G20 BEPS tax treaty-related changes and recommendations into their own tax treaties, of which there are around 2,000. These measures will prevent treaty abuse, improve dispute resolution, prevent the artificial avoidance of permanent establishment (PE) status and neutralize the effects of hybrid mismatch arrangements.
Signing the MLI
The signing ceremony was part of the Annual OECD Week, which included the OECD Forum on ‘Bridging Divides’ and the Ministerial Council Meeting entitled ‘Making Globalisation Work: Better Lives For All’. It featured a number of high-profile speakers from the OECD and G20, as well as ministers of finance, ministers of budget, ministers of economy and more.
A global agreement
The MLI was developed with input from more than 100 countries and jurisdictions, under a mandate presented by G20 finance ministers and central bank governors in February 2015. Now that it has been signed, it needs to be ratified by each of the countries. Pascal Saint-Amans, Director of the Centre for Tax Policy and Administration, has said that 25–30 further countries are expected to sign the convention by the end of 2017.
To find out more about the MLI, or to request access to our premium royalty rate database for help with transfer pricing, comparables data, industry royalty rates and the valuation of intangibles, contact us at RoyaltyRange today.
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