BEPS Action Plan: Action 15 – A multilateral instrument

The final action of the BEPS Action Plan is the development of a multilateral instrument that countries can use to implement various treaty-related measures developed in the course of the work. Following are commentary and links to content relating to action 15.


12 July 2017

Cameroon became the 70th signatory to the MLI Convention on 11 July 2017…

when, at the OECD Headquarters in Paris it was signed by Alamine Ousmane Mey (Minister of Finances of Cameroon). It has been added to the index of the positions of territories on the MLI and is in French.

It has listed 5 covered tax agreement territories (France, Canada, South Africa, Tunisia and Morocco - of which the first three similarly list the agreement but the last two have not yet signed the MLI)


6 July 2017

On 5 July 2017 the OECD announced that Mauritius had signed the MLI to …

effect modifications to various of its existing double tax treaties, in accordance with the choices it and counterparty territories have made. Mauritius has been added to the index of the positions of territories on the MLI . It has listed 23 covered tax agreement territories, generally opts out of all but the minimum standards (so does not apply permanent establishment (PE) status changes) and accepts the interim use of a principal purpose test (PPT) but will move in due course to a detailed limitation on benefits (LOB) variation.


13 June 2017

When territories signed up to the MLI they also lodged with the OECD …

their provisional decisions on various choices available under the MLI in amending the effect of existing bilateral and other double tax treaties. The impact will depend on a degree of ‘matching’ those choices and with a suitable lag time after the parties to a particular treaty have ratified their positions.

The MLI introduces considerably more complexity and uncertainty into the international tax system. The choices available to each territory are extensive and, at least initially, matching the approaches of particular territories may be challenging.

The OECD’s role is to publish information on territories’ choices, irrespective of whether the territories do so themselves. We have seen some helpful material already, though any additional assistance from the OECD may come later.

Furthermore, businesses may want to think through the consequences related to particular fact patterns.

See further our Tax Policy Bulletin “Draft MLI positions of different territories reflect a range of views on BEPS implementation”


8 June 2017

On 7 June 2017, in Paris, 68 territories signed the MLI, as set out in an OECD press release which …

noted that “treaty measures that are included in the new multilateral convention include those on hybrid mismatch arrangements, treaty abuse, permanent establishment, and mutual agreement procedures, including an optional provision on mandatory binding arbitration, which has been taken up by 25 signatories.”

There is an index of the positions of territories on the MLI.


5 December 2016

On 24 November 2016, the OECD published the 49-page MLI or more fully …

the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS and its accompanying 86-page Explanatory Statement.

The Convention (MLI) has two main aims:

  • to transpose a series of tax treaty measures from the OECD/G20 Base Erosion and Profit Shifting Project (BEPS) into existing bilateral and multilateral tax agreements, and
  • to set a new standard for mandatory binding arbitration in relation to resolving double tax disputes.

The OECD’s aspiration was that having over 100 states, territories and jurisdictions indicating their interest in the work of the ad hoc group negotiating the MLI would facilitate the process of implementing the treaty-based aspects of the October 2015 BEPS report recommendations - the ‘minimum standards’ (treaty abuse and basic dispute resolution/ compensating adjustment rules) which are mandatory (albeit with some optionality), and all other changes (including arbitration) which are essentially optional.

One could reasonably expect that the 27 countries that have apparently been involved in developing the arbitration standard will generally adopt it. This, in turn, may bring swifter relief for many cross-border business tax disputes.

The MLI could enable the signatory parties to make a large number of the changes to their existing treaties, whether based on the OECD or UN model convention.

However, the flexibility included in the MLI suggests that some of the parties do not intend to implement or fully implement some of those recommendations.

While some options were included in the recommendations and the MLI needs to reflect them, part of the flexibility is designed to enable parties to opt out of particular recommendations altogether or to disapply them for individual treaties (“to accommodate specific tax treaty policies” per the OECD press release). Unfortunately the OECD could not ensure a greater level of application thus giving rise to greater uncertainty.

The parties’ provisional notifications of their intentions to sign the MLI next year will better indicate the level of consistency in applying the BEPS measures and whether the MLI will effectively achieve its goals.

See further our Tax Policy Bulletin “OECD publishes multilateral instrument for implementing BEPS in double tax treaties”

11 April 2016

The OECD continues to work with the ad hoc group of about 95 countries with a focus on trying to …

balance flexibility (so to include as many countries as possible) with practicality and administrability of the instrument (the optionality in some of the Recommendations complicates this issue).

The separate sub-group working on arbitration is liaising with the FTA’s MAP Forum which is simultaneously working on the terms of reference for implementing Action 14 and the peer review process which that entails.

The effective date for application of the MLI, once it is signed (still expected by December), will become clearer as discussions progress and countries commit to signing it.

It seems likely there will not be any form of business consultation on the MLI, in the same way that there is no direct involvement in bilateral treaty negotiations. It is possible that there might be a release of the final draft before completion as there is with the Model Tax Convention.

6 February 2016

A European Commission Recommendation, published as part of its Anti-Tax Avoidance Package, urges EU Member States to …

implement the OECD BEPS proposals including via discussions on the MLI for those considering taking that route to update their bilateral treaties for, as our EU Direct Tax Newsalert of 28 January

  • addressing tax treaty abuse in accordance with Action 6, but ignoring the LOB option and adopting “a GAAR based on a principal purpose test (PPT)”, and
  • amending treaty definitions of permanent establishment to reflect the OECD's proposed amendments to Article 5 of the OECD Model Tax Convention as set out in Action 7.

Where Member States include in tax treaties a PPT, the EC further recommends that the rule should be modified to comply with EU case law such that genuine economic activity is not affected, a requirement which could be problematic as described in our Tax Policy Bulletin of 5 February.

8 November 2015

The organisation of the work on the Multilateral Instrument is apparently continuing as broadly intended such that …

at a meeting of the ad hoc forum on 5 November progress was made on:

  • the relationship between the Multilateral Instrument and the existing bilateral treaty network
  • the sub-group of interested countries and jurisdictions for the development of the optional provision on mandatory binding MAP arbitration.

5 October 2015

The development of the multilateral instrument for overriding bilateral tax treaties for BEPS changes is being taken forward by an ad hoc Group and...

its Chair Mike Williams (UK) had previously said the group would aim to have the instrument ready for signature by the end of 2016.

The Group of about 90 countries is due to meet on 5-6 November 2015 (back-to-back with the 20th Annual Tax Treaty Meeting for government officials).

One significant development is that we understand the US is now participating, although it had initially said it was not ready to do so. A number of international organisations will be invited to participate in the work as Observers.

28 May 2015

Work on the development of the Multilateral Instrument to implement the tax treaty-related Base Erosion and Profit Shifting (BEPS) Action Plan began on 27 May 2015 in Paris...

As per the OECD/G20 mandate, the ad hoc Group that will complete the work under Action 15 has been established, with over 80 countries participating (the US being a notable absentee at this stage).

At the meeting, members of the Group appointed Mr Mike Williams of the UK as Chair, and Mr Liao Tizhong of the People’s Republic of China, Mr Mohammed Amine Baina of Morocco and Mrs Kim S. Jacinto-Henares of the Philippines as Vice-Chairs.

Participants also agreed on a number of procedural issues so that the substantive work can begin at an Inaugural Meeting which will take place on 5-6 November 2015 (back to back with the 20th Annual Tax Treaty Meeting for government officials which will take place on 3-4 November 2015).

A number of international organisations will also be invited to participate in the work as Observers.

24 September 2014

The recently-released OECD paper now…

confirms that a multilateral instrument is both desirable and, from a tax and public international law perspective, technically feasible.

The report indicates that in January 2015, OECD and G20 countries will consider a draft mandate for an international conference for the negotiation of a multilateral convention.

There is also an indication that such an instrument could, in addition to updating bilateral treaties, be used for other things, such as to “express commitments” to implement certain domestic law measures or provide the basis for exchange of the country-by-country template, discussed above.

There is no discussion of the practicalities of such an instrument but the reference to the fact that “interested countries” may wish to develop a multilateral instrument perhaps hints at the difficulties of achieving a full consensus in this area.

26 May 2014

The OECD’s webcast today noted that international tax and legal experts had come to the conclusion that …

it is feasible and desirable to develop an instrument which will amend a large number of bilateral treaties at once.

Negotiation will be proposed through an International Conference (including developing countries on an equal footing) with ratification by national laws.

There is a need for a toolkit and framework, with work commencing early in 2015.

2 April 2014

An interesting point (raised in response to a question at the end of the OECD’s second update webcast) was that the OECD would …

push for mandatory arbitration to be included in the multilateral instrument which it proposes to put forward under Action 15.

2 September 2013

Even if it proves possible to develop an appropriate instrument, each country would have to go through a process of adopting it, and that …

may not be straightforward, particularly if in the country’s eyes it subjugates part of their sovereign right to tax.

The mechanism might be used to give effect to other actions, as a one-off exercise, or to provide for the need to counter other practices as they evolve.

Countries will then need to decide whether it’s something they might opt in to.

19 July 2013

This action point focuses on the need for a legal basis for jurisdictions to implement many of the other action points. If it were possible to develop an instrument …

which overrides existing treaties or alters a number of treaties at once, that would make it much easier for jurisdictions to implement necessary changes. Some helpful work has been done in this area before but there needs to be general confirmation that international law does allow it.

The action is to investigate whether it is feasible to develop an instrument of this nature and, ultimately, then to do so. There is a two-year time frame for this.


Contact us

Stef van Weeghel
Leader, Global Tax Policy & Administration Network
Tel: +31 (0) 88 792 6763

Follow us