On November 14, 2018 the OECD released new Guidance for the development of synthesised texts (Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI)). On the same date also a Secretariat note was released. This Secretariat note clarifies the entry into effect rules for tax treaties of jurisdictions that deposited their ratification instruments in September 2018.

 

Guidance for the development of synthesised texts

This Guidance has been prepared by the OECD to provide suggestions to Parties to the MLI for the development of documents they could produce to help users of the MLI to understand its effects on tax agreements it covers and modifies (the “Covered Tax Agreements”). The objective is to present in a single document and for each covered tax agreement: the text of a Covered Tax Agreement, including the text of relevant amending instruments; the elements of the MLI that have an effect on the Covered Tax Agreement as a result of the interaction of the MLI positions of its Contracting Jurisdictions; and information on the dates on which the provisions of the MLI have effect in each Contracting Jurisdiction for the Covered Tax Agreement. Such documents would be referred to as “synthesised texts”.

 

In the Guidance for the development of synthesised texts a.o. the following subjects are being discussed:

·   The suggested approach for the development of synthesised texts

o  Principles for the development of synthesised texts

o  Legal citation 

o  Challenges in preparing synthesised texts 

o  Suggestions for the development of synthesised texts

§   General disclaimer

§   Disclaimer on the entry into effect of the MLI provisions

§   Dates on which the MLI provisions have effect

§   Identification of the MLI provisions

§   Effects on existing provisions – general

§   Effects on existing provisions – partial modifications

§   Effects on existing provisions – replacing several existing provisions

§   Terminology changes

§   Title of the Synthesised texts

§   Headings

§   Numbering the MLI provisions

§   Part VI: arbitration

§   Languages

·   Per-Article sample boxes for the development of synthesised texts

o  Sample Disclaimer

o  Sample Disclaimer on the Entry into Effect of the MLI Provisions

o  Article 3 – Transparent Entities

§   Article 3(1)

§   Article 3(2)

o  Article 4 – Dual Resident Entities

§   Article 4(1)

o  Article 5 – Application of Methods for Elimination of Double Taxation

§   Article 5(2) – Option A

§   Article 5(4) – Option B

§   Article 5(6) – Option C

o  Article 6 – Purpose of a Covered Tax Agreement

§   Article 6(1)

§   Article 6(3)

o  Article 7 – Prevention of Treaty Abuse

§   Article 7(1)

§   Article 7(4)

§   Article 7(8)-(13) – Simplified Limitation on Benefits Provision

o  Article 8 – Dividend Transfer Transactions

o  Article 9 – Capital Gains from Alienation of Shares or Interests of Entities Deriving their Value Principally from Immovable Property

§   Article 9(1)

§   Article 9(4)

o  Article 10 – Anti-abuse Rule for Permanent Establishments Situated in Third Jurisdictions

o  Article 11 – Application of Tax Agreements to Restrict a Party’s Right to Tax its Own Residents

o  Article 12 – Artificial Avoidance of Permanent Establishment Status through Commissionnaire Arrangements and Similar Strategies

o  Article 13 – Artificial Avoidance of Permanent Establishment Status through the Specific Activity Exemptions

§   Article 13(2) – Option A

§   Article 13(3) – Option B

§   Article 13(4)

o  Article 14 – Splitting-up of Contracts

o  Article 15 – Definition of a Person Closely Related to an Enterprise

o  Article 16 – Mutual Agreement Procedure

§   Article 16(1), first sentence

§   Article 16(1), second sentence

§   Article 16(2), first sentence

§   Article 16(2), second sentence

§   Article 16(3), first sentence

§   Article 16(3), second sentence

o  Article 17 – Corresponding Adjustments

o  Part VI – Arbitration

§   Article 18 – Part VI

§   Article 19 – Mandatory binding arbitration

§   Article 20 – Appointment of Arbitrators

§   Article 21 –Confidentiality of Arbitration Proceedings

§   Article 22 – Resolution of a Case Prior to the Conclusion of the Arbitration

§   Article 23 – Type of Arbitration Process

§   Article 24 – Agreement on a Different Resolution

§   Article 25 – Costs of Arbitration Proceedings

§   Article 26 – Compatibility

§   Article 28 – Cases eligible to arbitration

o  Article 35 and Article 36 – Entry into Effect

§   Article 35(1) – General rules and choice to apply a shorter period with respect to other taxes levied

§   Article 35(2) – Choice to substitute “taxable period” for “calendar year”

§   Article 35(3) – Choice to replace the reference to “taxable periods beginning on or after the expiration of a period”

§   Article 35(4) – Specific rule for the entry into effect of Article 16 on Mutual Agreement Procedure

§   Article 35(5) – Entry into effect resulting from an extension of the list of agreements notified 

§   Article 35(7) – Completion of internal procedures

 

The Guidance furthermore contains an Annex containing an example of the Synthesised Text of the 2014 OECD Model Tax Convention as modified by the Multilateral Instrument.

 

Click here to be forwarded to the Guidance for the development of synthesised texts as released by the OECD on November 14, 2018.

 

Secretariat note

This note seeks to clarify the interpretation and application of Article 35 of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) on the entry into effect of the provisions of the MLI.

 

Click here to be forwarded to the Secretariat note as released by the OECD on November 14, 2018.

 

 

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