Multilateral Instrument   

The MLI is among the most important and crucial BEPS Action Plans for the purposes of implementing tax treaty-related measures in order to prevent the erosion of the taxable base and the shifting of profits. In this issue, we outline the MLI’s purpose, its key provisions, and its impact on the UAE tax treaties.

• June 2018 - Signing of MLIs
• May 2019 - Deposition of Instrument of Ratification
• September 2019 - Entry into force
• 114 DTTs listed as covered tax agreements
  
  

1. 47 Non- Signatories of MLI.
2. 67 Signatories of MLI.
3. 21 MLIs in force.
4. 46 MLIs not in force.
   
   

• Additional wording in the preamble of DTT states it should not be used for treaty abuse
• Strengthening the dispute resolution process through Mutual Agreement Procedure
• Retaining the existing permanent establishment (“PE”) definition
• Retaining the existing position on the taxation of capital gains realized on real estate rich entities
  
  

• Diverse national approaches

Requiring coordination and alignment of different countries’ tax systems

• Retroactive application003F 

Necessitating diligent review and potential modifications to existing tax arrangement

• Notification and reservation requirements

Timely communication and handling of reservations, can be logistically challenging for the countries involved

• MLI introduces provisions to prevent treaty abuse and artificial avoidance of PE status.
• MLI streamlines the modification of bilateral tax treaties, promoting consistency and predictability in international tax rules.
• Businesses operating across borders benefit from reduced double taxation risks and simplified compliance requirements under the MLI.