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"There is a crack, a crack in everything. That’s how the light gets in."

Monday, 28 August 2017   (0 Comments)
Posted by: Author: Lisa Brunton
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Author: Lisa Brunton (CDH)

In June 2017, during a ceremony hosted in Paris by the Organisation for Economic Co-operation and Development (OECD), 68 jurisdictions, including South Africa, signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) (MLI). The MLI was formulated under BEPS Action 15 (the multilateral instrument or MLI). 

At the time, several other jurisdictions expressed their intent to sign the MLI in the near future. The signing ceremony marked another significant milestone in the G20/OECD BEPS project, particularly with respect to the implementation of the treaty-related BEPS minimum standards. Given the fractured world in which we live, the collaborative signing and willingness to adhere to the measures of the MLI by so many countries across the globe, is nothing short of miraculous – it is the light shining through the crack.

At the time of signature, signatories submitted a list of their operative tax treaties that they wish to designate as Covered Tax Agreements (CTAs). CTAs are to be amended through the MLI. However, the MLI will not operate in the same manner as an amending protocol to an existing treaty, nor will it directly amend the provisions of existing bilateral treaties. Rather, it will apply alongside the existing treaties.

At this stage, it is anticipated that over 1,100 tax treaties will be modified based on matching the specific provisions that jurisdictions wish to add or change within the CTAs nominated by the signatories. The expectation that 1,100 tax treaties will be modified as a result of 68 jurisdictions signing the MLI, constitutes an unprecedented moment in international taxation. It is indicative of the global determination to cooperate on corporate taxation with a view to minimising base erosion while simultaneously striving to eliminate economically harmful double taxation.

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