Signing of multilateral instrument (MLI) to implement BEPS measures
On 7 June 2017, the OECD BEPS project reached its next milestone with the signing of the multilateral instrument (MLI) by 68 jurisdictions during a signing session in Paris. The Netherlands, Belgium, Luxembourg and Switzerland signed the MLI.
Being one of the most revolutionary aspects of the BEPS project, the MLI will modify a large number of existing bilateral tax treaties by including anti-tax avoidance measures developed in the BEPS project. The current signatories account for more than 1,100 tax treaties to be amended by the MLI.
The MLI will have effect for those bilateral tax treaties that are listed by both participating jurisdictions, after ratification of the MLI under their respective domestic rules and procedures and expiration of the MLI waiting periods. The date on which the MLI applies to a specific tax treaty depends on the two jurisdictions involved and when they will adopt the MLI. At least five countries must have ratified the MLI before it can enter into force.
The OECD expects that the first modifications to tax treaties pursuant to the MLI will become effective in 2018. We expect that the MLI will not become effective on a large scale until 2019 as jurisdictions will first have to complete domestic ratification procedures.
The MLI covers the treaty-related minimum standards, i.e. BEPS Action 6 on treaty abuse and BEPS Action 14 for the improvement of dispute resolution. Jurisdictions can choose to implement further provisions of the MLI. These optional provisions will come into force in bilateral relations, provided there is a ‘match’ in the choices made by the treaty partners. To what extent tax treaties will be amended by the MLI depends on the matches. For more information on the specifics of the MLI, please see our Tax Flash of 25 November 2016.
We will keep you updated on developments on this topic and we will shortly provide a more in-depth overview of the impact of the positions taken by the Dutch, Belgian, Luxembourg, and Swiss governments.
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