Covered Tax Agreement

The signatories listed 2,362 tax treaties that will be covered by the MLI. Of this amount, more than 1,100 contracts have been listed by the two signatories. This means that these “concordant” contracts will be modified by the MLI. Of course, the number of concordant contracts will increase as soon as new signatories join the MLI. It is likely that the first changes to the covered contracts will come into effect in 2018. There is no deadline for the IRM ratification procedure. In fact, implementation will be complicated. The different wording of tax treaties, the MFI ratification process, the extensive provisional lists of reservations and notifications of each signatory and the lists of contracts covered by each signatory make it difficult to apply tax treaties in practice. The minimum dispute resolution standard will ensure that contractual obligations related to mutual agreement are fully implemented in good faith and that administrative processes promote the prevention and timely resolution of contract disputes. The MLI amends tax treaties that are hedging tax agreements. A covered tax agreement is an agreement for the avoidance of double taxation, which is in force between the parties to the MLI and for which both parties have indicated that they wish to amend the agreement using the MLI.

Lists of notified tax treaties are available under the headings of the MFI: oe.cd/mli.2 The MLI is an important step for tax law and international contract law, as it allows all interested jurisconsultations to update tax treaties with provisions that reflect internationally agreed standards. It is likely that the first changes to the covered contracts will come into effect in 2018. To date, more than 70 jurisdictions have signed the MFI and 1,100 tax treaties have been amended. Minimum standards, in particular the new, more rigorous abuse test called the Principle Purposes Test (PPT), must be transposed into all tax treaties. Optional provisions depend on the agreement of the parties and absolutely must not be implemented with the agreement of the parties. In many countries, no consolidated version of the amended treaties will be available. This means that taxpayers applying double taxation treaties must check the MFI and the possible consequences. Taxpayers may refer reciprocity disputes that are not resolved to independent and binding arbitration if they meet different criteria. The MLI consists of two types of provisions: minimum standards and optional provisions.

The minimum standards need to be transposed into all tax treaties, as agreed in the November 2015 BEPS package. Optional provisions depend on the agreement of the parties and absolutely must not be implemented with the agreement of the parties. The MLI does not modify contracts as a protocol. Instead, the MLI modifies contracts by sitting next to them. In many countries, no consolidated version of the amended treaties will be available. This means that, when applying a certain double taxation convention, taxpayers must check whether the other State Party has signed the MFI, whether the relevant tax treaty is covered, what provisions have been implemented and whether the amendments have become effective. Lawyers signing the MFI must indicate to which tax treaties the MFI is to be applied and amended. The tax treaties covered by the MLI are called Covered Tax Agreements (CTAs). Australia has adopted Article 4, but not the rule that would allow both tax administrations to grant contractual benefits in the absence of such an agreement.

A tax convention covered by this Convention is amended by the following pre-a00 text: “Is there any plan to eliminate double taxation of taxes covered by this Convention without creating opportunities for non-taxation or fiscal evasion by fiscal evasion or avoidance (including through contract purchase agreements to facilitate access to indirect tax under this Convention) to obtain benefits for residents of third parties;” . . . .