On November 24th 2016, the Organisation for Economic Co-operation and Development (hereafter referred as “OECD”) released the Multilateral Convention to implement tax treaty related measures to prevent base erosion and profit shifting (hereafter referred as “MLI” or the “Instrument”) in accordance with BEPS action 15.

The MLI is the result of the mandate given in February 2015 by the OECD/G20 to an ad hoc group, representing around 100 jurisdictions, to develop an Instrument aiming to modify in a more efficient and quicker manner the double-tax treaty network, which includes more than 2,000 bilateral conventions, of the participating jurisdictions.

The instrument is already open for signature since December 31st 2016 and will be effective once five jurisdictions at least have signed it.

A first signature ceremony is expected to take place in June 2017.

BEPS actions covered?

The following BEPS actions are included in the MLI:

  • Hybrid mismatches (BEPS Action 2);
  • Treaty abuse – simplified limitation of benefit clause (BEPS Action 6);
  • Avoidance of PE status (BEPS Action 7);
  • Improving dispute resolution (BEPS Action 14);
  • Arbitration.

Only the minimum standards of the BEPS report recommendations are mandatory (albeit with some optionalities). These are treaty abuse and dispute resolution. The other BEPS actions are optional.

How does the MLI work?

  • The MLI supplements and modifies the existing double-tax treaties concluded between different jurisdictions by imposing to signing jurisdictions a common set of minimum standards that will be applicable to the chosen double-tax treaties;
  • The OECD will be the depositary of the Instrument;
  • The Instrument is available for signature to all States or duly authorised jurisdictions (ex: Guernsey, Isle of Man, Jersey, etc.);
  • The Jurisdictions have to prepare the list of their double tax treaties that will be covered by the MLI;
  • Jurisdictions can make reservations or opt out of certain provisions, where it is permitted (such as Part VI regarding Arbitration);
  • Finally, States and any other jurisdiction have to ratify, accept or approve the Instrument.


It is expected that the taxable periods beginning in 2019 will be the first periods to which the MLI will apply.

By way of this Instrument the above mentioned BEPS Actions may be implemented swiftly since the MLI enables a modification of the existing treaties without using the traditional procedure (i.e. amending protocol).