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The latest talk in the refresher programme series, ''The MLI to prevent BEPS. What’s behind the acronyms. A guide to understanding the Multilateral Instrument'' was given on September 21st by José María Remacha, academic collaborator in ESADE’s law department, and transfer pricing partner at the EY Abogados law firm following his time as head of the regional inspection team of the Catalonian tax authorities.
On 7 June 2017, the Organization for Economic Co-operation and Development (OECD) hosted the signing ceremony for the Multilateral Convention to implement tax treaty related measures to prevent base erosion and profit shifting (BEPS). During the ceremony, 67 countries signed the MLI and others expressed their commitment to sign it in the future. ''This means that the MLI will lead to changes in more than 1,100 treaties, and multinationals know that these are major changes that call for restructuring,'' the professor said.
The MLI was developed to provide a vehicle for the rapid implementation of measures related to tax treaties whilst giving countries significant flexibility to decide which parts they adopt, modify or reject.
''The aim is to be clear so it is accompanied by explanatory statements, a special notification regime and support from the OECD to clarify doubts. It is also flexible, because each country can decide which treaties are to be amended and how they must be applied,'' as Remacha pointed out.
It is only applicable to the agreements that one wishes to amend and to specific articles. Moreover, if an article is mandatory, this can be done is several ways, i.e. those concerning measures against fraudulent tax practices, and transparency, treaty shopping and better dispute settlement. A mandatory arbitration system is also established.
It must be pointed out that some countries said beforehand that they only intended to include a small number of treaties to be signed but that they would add treaties as they completed the bilaterally agreed implementation with respect to those treaties.
As regards the signing, each signatory submits to the OECD a document containing a list of its treaties together with their preliminary positions and reservations regarding each provision.
Remacha analysed several articles in the MLI, such as article 12 (avoidance of PEs by means of commissionaire arrangements), article 10 (PEs in third-party jurisdictions) and article 4 (dual resident entities), among others. ''One thing is the treaty and another how it is modified or takes effect.'' He therefore stressed the importance of not acting hastily. In the event of doubt, he advised the audience to read the agreement and see how it is applied.
The OECD has posted guidelines about its application on its website along with a database listing the agreements of each country.
José María Remacha brought the talk to a close by emphasising the substantial modifications that the MLI will mean for dual taxation agreements, the future incorporation of new states and the emergence of potential problems. ''Let’s hope that these are settled by arbitration, although we must realise that what companies are after is security.'' He also commented on the tax reform promoted by Trump and its relationship with BEPS. ''We already know that his policy is 'America first.'''
Each member may bring a maximum of one guest.
See you there!
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Public transport: Bus (22, 64, 78, 63 and 75), Metro (L3 Maria Cristina) and FGC (L6 Reina Elisenda).
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