UK and International Tax news

Implementation Of Multilateral Convention On BEPS

Monday 26th March 2018

OECD has recently confirmed that the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting [the ‘Convention’] will enter force on 1 July 2018,  marking a significant step in international efforts to update the existing network of bilateral tax treaties and reduce opportunities for tax avoidance by multinational enterprises.

The entry into force of the Convention, just one year after the first signature, underlines the strong political commitment to a multilateral approach to fighting BEPS by multinational enterprises. The entry into force follows from the deposit of the fifth instrument of ratification by Slovenia on 22 March 2018. Previously, the Republic of Austria (22 September 2017), the Isle of Man (19 October 2017), Jersey (15 December 2017), and Poland (23 January 2018) deposited their instruments with the OECD.

The Convention will transpose results from the OECD/G20 BEPS project in respect of four Actions including:

  • Hybrid Mismatches [under Action 2],
  • Treaty Abuse [under Action 6],
  • Avoidance of Permanent Establishment Status [under Action 7] and
  • Improving Dispute Resolution [under Action 14]

into more than 2,000 tax treaties worldwide.

The entry into force of the Convention on 1 July 2018 will bring it into legal existence in these five jurisdictions and its contents will start to have effect for existing tax treaties as from 2019.

The Convention is the first multilateral treaty of its kind, allowing jurisdictions to transpose results from the OECD/G20 BEPS Project into their existing bilateral tax treaties, transforming the way tax treaties are modified. The Convention has been designed to strengthen existing tax treaties concluded among its parties without the need for burdensome and time-consuming bilateral renegotiations.

The OECD is the depositary of the multilateral convention and is supporting governments in the process of signature, ratification and implementation. The position of each signatory under the convention is available on the OECD website.

If you would like more details on the Convention, please contact Keith Rushen on 0207 486 2378.

 

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