The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (‘Multilateral Instrument’,MLI) was signed by 68 jurisdictions, among them Switzerland, on 7 June 2017 in Paris. Nine further jurisdictions have signed a letter expressing their intention to sign the MLI. What does this mean for us and our clients? We asked Susanne Schreiber and Peter Reinarz from Baer and Karrer to enlighten us.
After the publication and subsequent endorsement of the final BEPS package by the G20 Finance Ministers in October 2015 it became clear that in order to implement some of the measures, it would be necessary to modify the existing double-tax treaties. Against this background, a group of over 100 countries and jurisdictions drafted a multilateral convention, which allows an efficient transposition of the results from the BEPS project into their existing bilateral treaty network. The text of this so-called “Multilateral Instrument” was published on 24 October 2016.
Functioning of the MLI
The MLI does not directly trigger a modification of, but needs instead to be read alongside the existing treaties. Each country can state, which of its existing
treaties it wishes to modify by means of the MLI. Once a treaty is notified by both countries, it becomes a “Covered Tax Agreement”. Over 1,100 treaties could already be matched.
