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Multilateral Convention to Implement Tax Treaty Did not Enter in Force in Italy Yet
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the Convention), adopted on 24 November 2016, is one of the outcomes of the OECD/G20 Project to tackle Base Erosion and Profit Shifting (the “BEPS Project”). The BEPS Action Plan identified 15 actions to address base erosion and profit shifting (BEPS) in a comprehensive manner, and set out deadlines to implement those actions.
The Action 15 Report, “Developing a Multilateral Instrument to Modify Bilateral Tax Treaties”, concluded that a multilateral instrument, providing an innovative approach to enable countries to swiftly modify their bilateral tax treaties to implement measures developed in the course of the work on BEPS, is desirable and feasible, and that negotiations for such an instrument should be convened quickly.
Article 1 of Multinational Convention defines the scope of its application and states that “The Convention modifies all Covered Tax Agreements”. It is opportune to clarify that the Convention operates to modify tax treaties between two or more Parties to the Convention but it 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; instead, it will be applied alongside existing tax treaties, modifying their application in order to implement the BEPS measures. The purpose of the Convention is to swiftly implement the tax treaty-related BEPS measures.
The Multinational Convention apply, in particular, to Transparent Entities, Dual Resident, Application of Methods for Elimination of Double Taxationt Entities, Purpose of a Covered Tax Agreement, Prevention of Treaty Abuse, Dividend Transfer Transactions, Capital Gains from Alienation of Shares or Interests of Entities Deriving their Value Principally from Immovable Property, Anti-abuse Rule for Permanent Establishments Situated in Third Jurisdictions, Application of Tax Agreements to Restrict a Party’s Right to Tax its Own Residents, Artificial Avoidance of Permanent Establishment Status through Commissionnaire Arrangements and Similar Strategies, Definition of a Person Closely Related to an Enterprise, Mutual Agreement Procedure and Corresponding Adjustments.
As of today, the Multilateral Convention entered /will enter in force in the following countries:
- From 01-07-2018: Austria, Isle of Man, Jersey, Poland, Slovenia
- From 01-10-2018: New Zealand, Serbia, Sweden, United Kingdom
- From 01-01-2019: Australia, France, Israel, Japan, Lithuania, Slovak Republic,
- From 01-04-2019: Malta, Singapore
- From 01-05-2019: Ireland, Monaco.
Maurizio Bottoni is the senior partner of Interconsulting. As a consultant in one of the Big Four he has developed a deep knowledge of the Italian and International tax law, through the involvement in operations and reorganization of multinationals. Extraordinary transactions and international issues are his daily business.