MLI Will Enter Into Force On 1 July, 2018

; posted on
March 28th, 2018

The OECD has announced that the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ('Multilateral Instrument' or 'MLI') will enter into force on July 1, 2018. Up to March 22, 2018, there are 78 jurisdictions in total that have signed the MLI.

Effect of MLI

The adoption of MLI is a milestone in the international efforts to update the existing network of bilateral tax treaties and to reduce opportunities for tax avoidance by multinational enterprises. It 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. “We are translating commitments into concrete legal provisions in more than 1,200 tax treaties worldwide. Thanks to this drive by the international community, we are ensuring that multinational companies pay their fair share when it comes to fulfilling tax obligations, like citizens do,” according to OECD Secretary-General Angel Gurría.


Revenue losses from base erosion and profit shift are conservatively estimated at USD 100-240 billion annually, or the equivalent of 4-10% of global corporate income tax revenues.

And the OECD/G20 BEPS Project delivers solutions for governments to close the gaps in existing international rules, among which the MLI acts as a potent tool to convert the outcome of BEPS project into practice. Despite that a significant number of jurisdictions have signed the MLI, take Art.5 of the OECD Model Convention as an example, the adoption rate of the permanent establishment (PE) related provisions (Action 7) through the MLI is currently low, according to OECD in the Interim Report on Digital Economy Taxation. But this does not reflect the full degree of implementation and impact of the MLI over time, as indicated by the early responses of some digitalised MNEs (e.g., Amazon, eBay, Facebook) that have already started changing their trade structures based on remote sales models to local reseller models.

Sources: OECD

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