BEPS Update: OECD Multilateral Instrument Signed

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...