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Approved Changes (1)
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Negotiations for BEPS Multilateral Instrument Concluded

On 24 November 2016, the OECD announced that negotiations have concluded for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The MLI was developed by an ad hoc group of over 100 countries as part of BEPS Action 15.

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More than 100 jurisdictions have concluded negotiations on a multilateral instrument that will swiftly implement a series of tax treaty measures to update international tax rules and lessen the opportunity for tax avoidance by multinational enterprises.

The new instrument will transpose results from the OECD/G20 Base Erosion and Profit Shifting Project (BEPS) into more than 2,000 tax treaties worldwide. A signing ceremony will be held in June 2017 in Paris.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS will implement minimum standards  to counter treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies. It will also allow governments to strengthen their tax treaties with other tax treaty measures developed in the OECD/G20 BEPS Project.

The OECD/G20 BEPS Project delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to « disappear » or be artificially shifted to low or no tax environments, where companies have little or no economic activity. Revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually, or the equivalent of 4-10% of global corporate income tax revenues. Over 100 countries and jurisdictions are currently working in the Inclusive Framework on BEPS to implement BEPS measures in their domestic legislation and treaties. The sheer number of bilateral treaties makes updates to the treaty network on a bilateral basis burdensome and time-consuming. The new multilateral convention helps solve this.

"The adoption of this multilateral instrument marks a turning point in tax treaty history," said OECD Secretary-General Angel Gurría. "It will save countries from multiple bilateral negotiations and renegotiations to implement the tax treaty changes in the BEPS Project. More importantly, having more than 100 jurisdictions on board will help ensure consistency in the implementation of the BEPS Project, which will result in more certainty and predictability for businesses, and a better functioning international tax system for the benefit of our citizens." Read the speech.

The multilateral convention was developed over the past year, via negotiations involving more than 100 jurisdictions including OECD member countries, G20 countries and other developed and developing countries, under a mandate delivered by G20 Finance Ministers and Central Bank Governors at their February 2015 meeting. The negotiations were led by Mike Williams, Director of Business and International Tax at HM Treasury, United Kingdom.

"The conclusion of negotiations on the instrument is a major achievement," said Mr. Williams. "The conclusion of this process also marks a beginning, as important work lies ahead for governments to prepare their own processes for signature, ratification and implementation."

The OECD will be the depositary of the multilateral instrument and will support governments in the process of its signature, ratification and implementation. A first high-level signing ceremony will take place in the week beginning 5 June 2017, with the expected participation of a significant group of countries during the annual OECD Ministerial Council meeting, which brings together ministers from OECD and partner countries to discuss issues of global relevance.

The text of the Convention, along with an explanatory statement is available: www.oecd.org/ctp/treaties/multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-beps.htm

For more information, please visit: http://www.oecd.org/tax/treaties/multilateral-instrument-for-beps-tax-treaty-measures-the-ad-hoc-group.htm

Proposed Changes (1)

Sweden

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Sweden Considering Tax Reporting Requirements for the Sharing Economy

The Swedish tax authority is reportedly considering ways to effectively tax the sharing economy that may include new tax reporting requirements and guidance for operators of sharing platforms, such as Airbnb and Uber. The reporting requirements and guidance would help to address the ambiguity in how Sweden's current tax rules apply to transactions in the sharing economy in relation to income tax, value added tax, and social security contributions.

Treaty Changes (6)

Bahrain-Philippines

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Protocol to Tax Treaty between Bahrain and the Philippines under Negotiation

The Philippine Ambassador to Bahrain has announced that negotiations are underway for a protocol to amend the 2001 income and capital tax treaty between the two countries. Any resulting protocol would be the first to amend the treaty, and must be finalized, signed, and ratified before entering into force.

India-Switzerland

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India and Switzerland Sign Joint Declaration on the Automatic Exchange of Financial Account Information

On 22 November 2016, officials from India and Switzerland signed a joint declaration on the automatic exchange of financial account information on a reciprocal basis, according to a press release from the Swiss Federal Council. The information exchange will be carried out based on the OECD Common Reporting Standard (CRS). India and Switzerland intend to start collecting data in 2018 and to exchange it from 2019.

Madagascar-Morocco

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Tax Treaty between Madagascar and Morocco Signed

On 18 November 2016, officials from Madagascar and Morocco signed an income tax treaty. The treaty is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Saint Lucia-OECD

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Saint Lucia Signs Mutual Assistance Convention

The OECD has announced that on 21 November 2016, Saint Lucia signed the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The Convention must now be ratified by Saint Lucia, and the ratification instrument deposited before entering into force in the country.

Click the following link for the signatories to the Mutual Assistance Convention to date.

Serbia-Korea, Rep of

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Tax Treaty between Serbia and South Korea has Entered into Force

The income tax treaty between Serbia and South Korea reportedly entered into force on 17 November 2016. The treaty, signed 22 January 2016, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Serbian corporate income tax and personal income tax. It covers Korean income tax, corporation tax, special tax for rural development, and local income tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 10%
  • Royalties - 5% for the use of, or the right to use, any copyright of literary, artistic, or scientific work including cinematograph films or films or tapes used for radio or television broadcasting; 10% for the use of, or the right to use, a patent, trademark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience.

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation. In respect of dividends received by a Korean resident company that owns at least 10% of the voting shares or capital stock of the paying company, Korea will also provide a credit for the Serbian tax payable on the profits out of which the dividends are paid.

Limitation on Benefits

Article 28 (Limitation on Benefits) includes that the beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), 13 (Capital Gains), and 22 (Other Income) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims, or other rights in respect of which the income is paid was to take advantage of those Articles by means of that creation or assignment.

MFN Clause

The final protocol to the treaty includes the provision that if Serbia signs a tax treaty with a third State that is a member of the OECD, and such treaty provides for a lower rate of tax on interest or royalties, then the competent authorities of the Contracting States should meet as soon as possible to reduce the rates under the Serbia-South Korea tax treaty.

Effective Date

The treaty applies from 1 January 2017.

Switzerland-Kosovo

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Switzerland to Negotiate SSA with Kosovo

The Swiss Federal Council has authorized the negotiation of a social security agreement with Kosovo. Any resulting agreement would be the first of its kind directly between the two countries, although the 1962 agreement between Switzerland and the former Yugoslavia had applied in respect of Kosovo until its application was terminated in 2010.

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