The BEPS Multilateral Instrument
The BEPS Multilateral Instrument

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • The BEPS Multilateral Instrument
  • The BEPS Project and the MLI
  • Has the MLI come into effect?
  • How does the MLI work?
  • Synthesised texts
  • Structure of the MLI
  • Hybrid mismatches
  • Treaty abuse
  • Permanent establishments
  • Dispute resolution and arbitration
  • more

The Organisation for Economic Cooperation and Development (OECD)’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), also known as the BEPS Multilateral Instrument (MLI), gives effect to the BEPS Actions that required changes to tax treaties, without the need for each treaty to be separately renegotiated.

When a taxpayer seeks to rely on a double tax treaty, their adviser should consider whether the relevant article of that treaty is affected by the MLI. This is most obviously the case where the provision is directly modified by the MLI (for instance, in relation to permanent establishments or hybrid entities), but it is also important to consider the potential for the treaty abuse aspects of the MLI to affect the availability of other treaty benefits. For example, the MLI does not directly modify the dividend or interest articles of treaties, but the principal purpose test has the potential to deny the benefits that those articles would otherwise provide.

This Practice Note:

  1. provides some background to the MLI and its place in the BEPS project

  2. describes how and when the MLI comes into effect in individual jurisdictions

  3. explains how the MLI works—how, mechanically, a single instrument can modify hundreds of differently-worded double tax treaties

  4. explains the concept of a synthesised text—these reproduce bilateral tax treaties and show how