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Canada Begins MLI Ratification Process

Canada Begins MLI Ratification Process

Canada has begun the Multilateral Instrument (MLI) ratification process.


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The MLI was tabled in parliament on January 31, 2018—the first step of the treaty ratification process. With the federal budget now only a week away, it will be interesting to see if Finance will provide any insight into potential changes to Canada's initial reservations to almost all of the provisions of the MLI. Canada may withdraw reservations to adopt additional provisions of the MLI at the time of ratification.

Remaining steps to ratification
During the ratification process, the MLI treaty will be tabled for at least 21 sitting days in parliament. A number of steps remain after this period elapses: a bill must be introduced and receive Royal Assent, authorization must be obtained from the Governor in Council to ratify the MLI and, finally, a notice of ratification must be deposited with the OECD.

The MLI was developed as part of Action 15 of OECD Base Erosion and Profit Shifting (BEPS) initiative to modify existing bilateral treaties to implement BEPS measures. The instrument is intended to streamline the implementation of the tax treaty-related measures without the need to individually renegotiate each treaty.

Canada signed the MLI on June 7, 2017. It has listed its treaties with 75 jurisdictions that it wishes to be covered by the MLI. For the MLI to modify a particular Canadian tax treaty, Canada's treaty partner must also ratify the MLI and list its tax treaty with Canada as an agreement it wishes to be covered by the MLI.

Canada's adopted provisions

Canada committed to the principal purpose test to address treaty abuse under Action 6 in accordance with the OECD's minimum standard. The principal purpose test is a general anti-abuse rule that considers whether one of the principal purposes of an arrangement or transaction is to obtain treaty benefits in a way that is not in accordance with the object and purpose of the relevant treaty provisions.

Canada also chose to adopt the "mandatory binding arbitration" provision to improve dispute resolution.

Although Canada reserved on all other provisions of the MLI when it signed the MLI last year, Finance noted at the CTF that Canada would continue to assess whether to adopt any additional provisions at the time the MLI is ratified.

For more information, contact your KPMG adviser.

Information is current to February 20, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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