Malta signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI)

Deloitte Malta Tax Alert

On 7 June 2017, officials from 76 countries and jurisdictions, including Malta, signed or formally expressed their intention to sign the widely-anticipated Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the ‘MLI’).

The MLI allows jurisdictions to swiftly transpose the results of the OECD/G20 BEPS Project by way of modifying their existing tax treaties networks. It is restricted solely to double tax treaties and does not affect any domestic law.

The measures included in the MLI address hybrid mismatches, treaty abuse, avoidance of permanent establishment, mutual agreement procedure and arbitration. While certain provisions of the MLI establish a number of minimum standards that are required to be implemented by jurisdictions signing up to it, in respect of other articles, the signatories may choose whether, and/or how, to apply options available by way of filing technical reservations and notifications.

The first modifications to tax treaties are expected to enter into effect in early 2018. The OECD is the depositary of the MLI. While the position of each signatory under the MLI is already available on the OECD website, the definitive position will be provided upon the deposit of its instrument of ratification, acceptance or approval of the MLI.

At the time of signature of the MLI, Malta defined 71 tax treaties as agreements it wishes to be covered by the MLI and opted to apply:

  • The Minimum Standard, which includes provisions dealing with the purpose of a covered tax agreements (article 6 of the MLI), prevention of treaty abuse (article 7 of the MLI) and mutual agreement procedure and corresponding adjustments (articles 16 and 17 of the MLI);
  • Provisions of article 9(4) of the MLI in connection with capital gains from alienation of shares or interests of entities deriving their value principally from immovable property; and
  • Provisions dealing with arbitration procedure subject to certain reservations (articles 18-26 of the MLI).     

The text of the MLI, the explanatory statement and background information can be found here.

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