On November 24, 2016, the OECD published a press release that more than 100 jurisdictions have concluded negotiations on a multilateral instrument (MLI) that will swiftly implement a series of tax treaty measures to update international tax rules and lessen the opportunity for tax avoidance by multinational enterprises. The MLI is intended to transpose results from the OECD/G20 BEPS Project into more than 2 000 treaties worldwide. It aims to implement minimum standards to counter treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty policies. It is also intended to allow Governments to strengthen their tax treaties with the other tax treaty measures developed in the OECD/G20 BEPS Project.
The MLI was developed over the past year, via negotiations involving more than 100 jurisdictions including OECD member countries, G20 countries and other developed and developing countries, under a mandate delivered by G20 Finance Ministers and Central Bank Governors at their February 2015 meeting.
Some of the articles contain minimum standards to which the signatories need to adhere to as a mandatory basis whereas some articles either contain alternative approaches and/or are optional altogether. The part containing mandatory binding arbitration (Part VI) is fully optional: a signing party may choose to apply this part with respect to its covered tax treaties and shall notify the OECD Depositary accordingly. Consequently, this part shall apply in relation to two contracting jurisdictions only where both jurisdictions have made such a notification. The signing countries may also make reservations to certain paragraphs of the articles.