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BEPS Update: OECD Multilateral Instrument Signed - Base Erosion and Profit Shifting

On June 7, 2017, ministers and high-level officials of 68 jurisdictions convened to formally sign the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), originally published on November 24, 2016 (the “Multilateral Instrument,” or “MLI”). The Multilateral Instrument is the product of ongoing efforts by the Organisation for Economic Co-operation and Development (“OECD”) to prevent perceived abuse by certain taxpayers and improve coordination between taxing authorities, including through enhanced dispute resolution. The Multilateral Instrument was designed as a mechanism for implementing widespread treaty reform and coordination within the existing network of bilateral double tax treaties – without requiring separate bilateral negotiations between each pair of contracting jurisdictions. (For more background, please see our prior blog post on the MLI here.) The June 7 event was an important intermediate step towards the effectiveness of the MLI, and is a major step forward in providing multinational coordination to the historically bespoke bilateral tax treaty network.

Among the June 7 signatories were the United Kingdom, France, the People’s Republic of China, and Hong Kong. The United States and Brazil did not sign; together with Saudi Arabia, these were the only three G20 countries not to do so. An additional nine countries have expressed their intention to sign the Multilateral Instrument at a later date, which if included would increase MLI participation to 77 jurisdictions. A complete list of the June 7 signatories is at the end of this discussion.

The OECD has published, for each signatory, a provisional list of the bilateral tax treaties such signatory intends to modify using the Multilateral Instrument, along with the specific MLI provisions to be either adopted or reserved on (including, where applicable, its elections under such provisions), and its notifications with respect to such selections (together, such signatory’s “MLI position”). Each signatory’s MLI position generally is subject to further revision pending final ratification of the Multilateral Instrument pursuant to such jurisdiction’s internal ratification procedures. PDFs containing the MLI positions for all current signatories (with the exception of Norway) can be accessed here.

Notably, a signatory’s MLI position may include reference to a bilateral tax treaty, even though the counterparty jurisdiction is not an MLI signatory. For example, the United Kingdom’s MLI position seeks to apply the Multilateral Instrument to its tax convention with the United States, notwithstanding that the United States has not, as yet, signed the MLI. A bilateral tax treaty will not be modified, however, unless and until both contracting jurisdictions have signed and ratified the Multilateral Instrument and identified such treaty as a covered tax agreement in their respective MLI positions.

Collectively, the signatories to the Multilateral Instrument have enumerated 2,362 unique treaties in their various MLI positions. Of these treaties, 1,103 have already been “matched” through the MLI reconciliation process and will, following ratification, be modified accordingly.

The OECD website contains a useful “MLI Toolkit” intended to facilitate implementation of the Multilateral Instrument, including a step-by-step overview of the implementation process. Also among the resources provided is a detailed, article-by-article flowchart illustrating the reconciliation process necessary for the application of the Multilateral Instrument to a bilateral tax treaty where the contracting jurisdictions have adopted different MLI positions (available for download here). The OECD intends to expand the MLI Toolkit over time, including by introduction of a “public online matching tool” (see MLI FAQs), which would simulate the likely matching outcome between sets of MLI positions (the final outcome determined by appropriate legal analysis). A beta version of this tool could be available as early as October 2017.

The following are signatories of the Multilateral Instrument as of June 7, 2017:

  • 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

  • Georg

  • 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 (*MLI position forthcoming)

  • Pakistan

  • Poland

  • Portugal

  • Romania

  • Russia

  • San Marino

  • Senegal

  • Serbia

  • Seychelles

  • Singapore

  • Slovak Republic

  • Slovenia

  • South Africa

  • Spain

  • Sweden

  • Switzerland

  • Turkey

  • United Kingdom

  • Uruguay

The following have expressed their intent to sign the Multilateral Instrument at a later date:

  • Cameroon

  • Côte d’Ivoire

  • Estonia

  • Jamaica

  • Lebanon

  • Mauritius

  • Nigeria

  • Panama

  • Tunisia

© 2021 Proskauer Rose LLP. National Law Review, Volume VII, Number 163

About this Author

Martin T Hamilton, Tax Attorney, Proskauer Rose Law Firm

Martin T. Hamilton is a Partner in the Tax Department, resident in the New York office. He primarily handles U.S. corporate, partnership and international tax matters.

Stephen Pevsner UK Tax law partenr Proskauer Rose private fund formation eorganisations, structured finance, investment funds

Stephen Pevsner is a tax partner and a member of the Private Investment Funds and Private Equity M&A groups. Stephen's practice covers the broad range of corporate and individual tax advice, with particular emphasis on private fund formation across a wide range of buyout, debt and infrastructure asset classes, as well as UK and international M&A transactions (often private equity backed). He has wide experience in corporate reorganisations, structured finance, investment funds and new business set-ups, and also advises regularly on a wide range of employee and fund manager...

Kathleen R Semanski, Tax Department Lawyer, New York,

Kathleen R. Semanski is an associate in the Tax Department.

  • University of California, Los Angeles, School of Law, J.D., 2016 
    Order of the Coif

  • Boston University, B.A., 2011 
    summa cum laude