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Singapore: Tax implications since Mauritius has adopted BEPS multilateral instrument (MLI)

Singapore: Tax implications, BEPS MLI

Mauritius in October 2019 ratified the multilateral instrument (MLI) pursuant to the base erosion and profit shifting (BEPS) project. The MLI is the agreement that allows jurisdictions to amend their tax treaties to include tax treaty-related BEPS recommendations. Because Singapore adopted the MLI in 2019, the action by Mauritius may have implications for existing structures with payments between Singapore and Mauritius.

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Background

Singapore in late December 2018 deposited with the OECD its instrument of ratification of the MLI. The entry into force date for the MLI is 1 April 2019 for Singapore’s network of income tax treaties.

At the time of ratification of the MLI, Singapore intended for the MLI to apply to 86 existing income tax treaties (“covered tax agreements”). For these purposes, a covered tax agreement between Singapore and the other treaty partner jurisdiction would be amended by the MLI if both jurisdictions share the same position on the MLI provisions and both have deposited their instruments of ratification with the OECD.

Singapore adopted the MLI article on “preventing treaty abuse”—a general anti-abuse rule (commonly referred to as the “principal purpose test”). Read TaxNewsFlash


Mauritius ratifies MLI

Mauritius in October 2019 ratified the MLI (with an entry into force date of 1 February 2020). Accordingly, existing structures with payments between Singapore and Mauritius that currently enjoy tax treaty benefits may be at risk of challenge under the “principal purpose test” of the MLI.

Read a November 2019 report [PDF 265 KB] prepared by the KPMG member firm in Singapore

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