MLI – Multilateral Instrument (BEPS Convention)

The Multilateral Instrument (MLI), officially the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS MLI), is a groundbreaking public international law instrument that enables hundreds of existing bilateral double tax treaties (DTTs) to be modified simultaneously without renegotiating each individual treaty.

The MLI was developed as part of the OECD/G20 BEPS (Base Erosion and Profit Shifting) project and was signed in Paris on 7 June 2017 by over 70 jurisdictions. It entered into force on 1 July 2018 and represents the most comprehensive simultaneous modification of the global network of tax treaties built up since the 20th century.

The MLI emerged as an elegant solution to a practical problem: the OECD's BEPS Action Plan envisaged numerous changes to existing tax treaties, the bilateral renegotiation of which would take decades.

• 2013: G20 mandates OECD to develop the BEPS Action Plan; Action Point 15 provides for a multilateral instrument
• 2016: Ad hoc group of over 100 countries negotiates the MLI text
• 2017-06-07: Signing conference in Paris; 76 jurisdictions sign initially
• 2018-07-01: MLI enters into force for first jurisdictions
• 2019 onwards: MLI enters into force for additional jurisdictions step by step; modification of respective DTT networks
• Today: Over 100 signatories; MLI modifies more than 1,800 bilateral tax treaties

The MLI modifies existing bilateral tax treaties (Covered Tax Agreements, CTAs) that both contracting states have listed in their list of covered agreements. It contains provisions on four BEPS action points:

• Hybrid mismatches (Articles 3–5): Measures against the abuse of hybrid instruments and entities
• Treaty abuse (Articles 6–11): Purpose statement for treaties; anti-abuse rules (PPT, LOB); provisions on dividends, capital gains
• Permanent establishments (Articles 12–15): Expanded definitions to prevent artificial PE avoidance
• Dispute resolution (Articles 16–26): Improved mutual agreement procedure (MAP) and mandatory binding arbitration (optional)

Each jurisdiction must notify the OECD Secretariat of its list of covered agreements and its options and reservations to individual articles.

• BEPS minimum standards (mandatory): Inclusion of a preamble on treaty purpose (Art. 6) and implementation of anti-abuse protection through PPT and/or LOB (Art. 7)
• Improved mutual agreement procedure (mandatory): Improvement of MAP access and process pursuant to Article 16
• List of covered agreements: Each jurisdiction determines which of its DTTs are modified by the MLI
• Options and reservations: Many articles are optional or allow reservations; modification of a DTT only occurs if both contracting states have chosen the respective option
• Notification: Ongoing obligation to inform the OECD Secretariat of changes to treaty lists or options
• Ratification: Domestic ratification and transposition into national law required

1 correction:
- MLI successors 'PPT, LOB' are incorrect — these are concepts within the MLI, not successors
1 clarification.