Countries sign multilateral tax treaty agreement to fight BEPS

The finance ministers of 72 countries on Wednesday signed a multilateral agreement to update over 2,000 tax treaties to combat tax avoidance and treaty shopping by multinational corporations. The formal signing ceremony in Paris implemented the Organisation for Economic Co-operation and Development’s (OECD’s) Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, which according to the OECD is designed to “swiftly implement a series of tax treaty measures to update international tax rules and lessen the opportunity for tax avoidance by multinational enterprises.”

The multilateral convention will implement the provisions of the OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS) in potentially more than 2,000 tax treaties. The convention modifies the application of those tax treaties to implement the BEPS project’s provisions, instead of requiring amending protocols to each of the treaties. In November, OECD Secretary-General Angel Gurría described this as “a turning point in tax treaty history” because “it will save countries from multiple bilateral negotiations and renegotiations to implement the tax treaty changes in the BEPS Project.”

The convention applies only to specific tax treaties listed by the parties to the agreement. The language of the convention was agreed to in November 2016 and was the result of the work of a group of 107 countries. It must now be ratified by the governments of the signing countries.

Although the US participated in the group that developed the convention, it did not sign the convention.

—Alistair Nevius (Alistair.Nevius@aicpa-cima.com) is CGMA Magazine’s editor-in-chief, tax.