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OECD, BEPS MLI Signatories

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Signing Ceremony Held for BEPS Multilateral Instrument

On 7 June 2017, the signing ceremony was held for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). Over 70 countries and jurisdictions signed the MLI or formally expressed their intent, with another 25 to 30 countries and jurisdictions expected to sign by the end of the year.

The BEPS MLI provides for the implementation of both mandatory minimum standards and optional provisions developed as part of the OECD BEPS Project. The related BEPS Actions and the main provisions are summarized as follows:

BEPS Action 2 (Hybrid Mismatches), including:

  • Transparent entities provisions, which clarify that treaty benefits will only be allowed to the extent to which the item of income is taxed in the state in which the entity is resident - Optional;
  • Dual resident entities provisions, which require that the competent authorities of the contracting jurisdictions agree on the residence status for dual resident entities for the purpose of treaty benefits - Optional; and
  • Elimination of double taxation provisions, which include strengthened options for the methods of eliminating double taxation in hybrid situations - Optional.

BEPS Action 6 (Preventing Treaty Abuse), including:

  • A new preamble that includes a statement that the common intention of the contracting jurisdictions is to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance, including through treaty shopping arrangements - Minimum Standard;
  • Anti-abuse rules, which may take the form of a principal purpose test (PPT) alone; a PPT together with a simplified limitation on benefits (LOB) clause; or a detailed LOB provision together with a PPT or anti-conduit rules - Minimum Standard;
  • A provision that requires shares to be held for a minimum of 365 days for the shareholder to be entitled to a reduced withholding tax rate on dividends - Optional;
  • A provision that strengthens the test for taxation of capital gains from the alienation of shares deriving value principally from immovable property - Optional;
  • A provision that denies treaty benefits in the case of income derived by a PE of a resident of one of the contracting jurisdictions if the PE is situated in a low-tax third jurisdiction - Optional; and
  • A provision that preserves a jurisdiction’s right to tax its own residents - Optional.

BEPS Action 7 (Preventing Artificial Avoidance of a PE), including:

  • A provision to deem non-residents using commissionaire and similar arrangements as having a PE in a jurisdiction - Optional;
  • A provision requiring an activity to be of preparatory and auxiliary nature in order to qualify for specific PE exemptions under a treaty - Optional;
  • An anti-fragmentation rule to prevent non-residents from avoiding a PE by dividing up activities that separately would not be treated as a PE, but would constitute a PE if taken together - Optional; and
  • An anti-contract splitting rule to prevent non-residents from avoiding a PE by splitting up contracts into time periods that are less than the applicable time period thresholds for a PE - Optional.

BEPS Action 14 (Improving Dispute Resolution), including:

  • Provisions for Mutual Agreement Procedure (MAP) allowing taxpayers to make MAP requests to either jurisdiction, which may add to or amend existing MAP provisions - Minimum Standard;
  • A provision requiring contracting states to make appropriate corresponding adjustments in transfer pricing cases - Optional; and
  • Provisions for mandatory binding arbitration - Optional.

In addition, the list of BEPS MLI signatories was published on 7 June, which includes links to the MLI positions for each jurisdiction at the time of signature. The positions include a provisional list of the notifications for tax treaties to be covered by the MLI and the expected reservations (options taken) for each jurisdiction. The definitive position for a jurisdiction will be provided upon the deposit of its instrument of ratification. Each signatory will need to go through its own ratification process to bring the MLI into force and a match-making process will be needed to determine which provisions of the MLI apply to the respective bilateral tax treaties.

In general, the BEPS MLI will become effective for a particular bilateral tax treaty:

  • With respect to withholding taxes from 1 January of the year following the MLI's entry into force for both parties, and
  • With respect to all other taxes for tax periods beginning on or after the expiration of a period of six months following the MLI's entry into force for both parties.

The first modifications to bilateral tax treaties are expected to enter into effect in early 2018.

The signatory list includes 68 jurisdictions that signed the BEPS MLI on 7 June:

Andorra; Argentina; Armenia; Australia; Austria; Belgium; Bulgaria; Burkina Faso; Canada; Chile; China (People’s Republic of); Colombia; Costa Rica; Croatia; Cyprus; Czech Republic; Denmark; Egypt; Fiji; Finland; France; Gabon; Georgia; Germany; Greece; Guernsey; Hong Kong (China); Hungary; Iceland; India; Indonesia; Ireland; Isle of Man; Israel; Italy; Japan; Jersey; Korea; Kuwait; Latvia; Liechtenstein; Lithuania; Luxembourg; Malta; Mexico; Monaco; Netherlands; New Zealand; Norway; Pakistan; Poland; Portugal; Romania; Russia; San Marino; Senegal; Serbia; Seychelles; Singapore; Slovak Republic; Slovenia; South Africa; Spain; Sweden; Switzerland; Turkey; United Kingdom; and Uruguay.

The list also includes the jurisdictions with intent to sign:

Cameroon; Estonia; Ivory Coast; Jamaica; Lebanon; Mauritius; Nigeria; and Tunisia.

For more information, click the following link for the OECD release on the signing ceremony.

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