Multilateral Convention to Implement Tax Treaty Related Measures (Download PDF)

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The Ratification of the Multilateral Convention to implement Tax Treaty Related Measures was recently approved by the Union Cabinet, aims to Prevent Base Erosion and Profit Shifting (MLI).

This BEPS multilateral instrument is an instrument to combat tax avoidance by multinational enterprises (MNEs) through prevention of Base Erosion and Profit Shifting (BEPS).

This multilateral instrument was negotiated within the framework of the OECD G20 BEPS project. It enables countries and jurisdictions to swiftly modify their bilateral tax treaties to implement some of the measures agreed.

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Impact & Overview

  • The India’s treaties will be modified by this Convention to curb revenue loss through treaty abuse and base erosion including the profit shifting strategies thereby ensuring that profits are taxed where substantive economic activities generating the profits are carried out and where value is created.

  • The BEPS Project identified 15 actions to address base erosion and profit shifting (BEPS) in a comprehensive manner.

  • OECD, BEPS associates and other interested countries which worked on an equal footing on the finalisation of the text of Multilateral Convention starting 2015.

  • The Convention enables all signatories inter alia, to meet treaty-related minimum standards that were agreed as part of the Final BEPS package including the minimum standard for the prevention of treaty abuse under Action 6.

  • The Convention will not function in the same way as an amending protocol to a single existing treaty, which would directly amend the text of the Covered Tax Agreement.

  • It will be applied alongside existing tax treaties, modifying their application in order to implement the BEPS measures.

  • To achieve anti-abuse BEPS outcomes through the multilateral route, the Convention also enables countries to implement the tax treaty related changes. There is no need to bilaterally re-negotiate each such agreement which is burdensome and time consuming.

  • It ensures consistency and certainty in the implementation of the BEPS Project in a multilateral context.

  • Ratification of the Multilateral Convention will enable application of BEPS outcomes through modification of existing tax treaties of India in a swift manner.

- Published/Last Modified on: August 26, 2019

Policy/Governance

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