MLI introduced on the 1st of April
Malta introduced the Multilateral Instrument which came into force on the 1st April 2019 and is a consequence on the BEPS Project.
The MLI came into force in Malta on 1 April, 2019 following the expiration of three months from the end of the month when Malta ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (‘MLI’) and deposited the instrument of ratification with the OECD on 18th December 2018.
The Multilateral Instrument and BEPS Project
The MLI is the result of the OECD BEPS Project Action 15 aimed at securing swift implementation of the treaty related measures resulting from the BEPS Project. It allows countries flexibility in the manner in which they meet the BEPS minimum standard on treaty abuse and dispute resolution.
Impact on Double Taxation Agreements
In order for a double taxation agreement (DTA) to be modified by the MLI, both contracting states must have opted for the agreement to be a covered agreement under the MLI and both contracting states must have adopted the same position in relation to the applicable MLI articles. Where contracting states have either made reservations in respect of a specific MLI article or have selected different provisions of the options available, this will block the modification of that specific article in the particular DTA. As a result the interpretation of DTAs can become very complex with not only the text of the bilateral agreement and any protocols being taken into account but also whether the particular contracting states are parties to the MLI, whether the DTA is a covered tax agreement and each contracting state’s position in relation to the various MLI articles and how these match or differ from each other.
