The OECD MLI will enter into force from 1 July 2018, following ratification by five jurisdictions.
The OECD’s Multilateral Convention (MLI) is due to enter into force on the first day of the month following the expiration of a period of three calendar months beginning on the date of deposit of the fifth instrument of ratification. This threshold was passed on 22 March when Slovenia deposited its instrument of ratification (following earlier deposits by Austria, Jersey, the Isle of Man, and Poland). Therefore the MLI will enter into force for these first five jurisdictions from 1 July 2018, and should generally enter into effect for Covered Tax Agreements between them from 1 January 2019 with respect to withholding taxes, and for purposes other than withholding taxes for taxable periods beginning on or after 1 January 2019. More jurisdictions are expected to ratify the MLI in the near future, including the UK, which has published the ratifying statutory instrument in draft.
The UK's draft SI, the Double Taxation Relief (Base Erosion and Profit Shifting) Order 2018, will implement the MLI under UK domestic law. The accompanying explanatory memorandum explains the options chosen by the UK and its reservations in respect of the MLI, and provides a link to the UK’s notification document that includes the Treaties designated as Covered Tax Agreements. The date on which the SI will be signed and ratified is not yet known.
For countries such as the UK ratifying at a later date, entry into force will take place on the first day of the month following the expiration of a period of three calendar months beginning on the date of the deposit of the instrument of ratification. This means that the MLI should generally enter into effect for withholding tax purposes on 1 January 2019 in relation to Covered Tax Agreements between the jurisdictions (including the first five) that ratify before 30 September 2018.
For all other taxes, the convention generally enters into effect for taxes levied with respect to taxable periods beginning on or after the expiration of a period of six calendar months from when it enters into force for that jurisdiction and therefore would need to be considered on a case by case basis.
For more information on the MLI, KPMG’s EU Tax Centre have prepared a Euro News Flash which can be found here.
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