OECD Tax Talk #4 - BEPS

On December 5, 2016 Pascal Saint-Amans, Director of the Centre for Tax Policy and Administration together with Achim Pross, Head of International Co-operation and Tax Administration, Gita Kothari, Senior Legal Advisor, Legal Directorate, Maikel Evers, Advisor, Centre for Tax Policy and Administration and Giorgia Maffini, Deputy Head of Tax Policy and Statistics informed in a Webinar on developments within the BEPS project and other related tax issues.

The focus of the Webinar was on the Multilateral Instrument («Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting»), which has been adopted on November 24, 2016.

Background Information on the Multilateral Instrument

Gita Kothari is convinced, that the Multilateral Instrument has various advantages compared to the bilateral double tax treaties.

The Multilateral Instrument significantly saves time and resources for States regarding the ratification process of the political consensus reached in the BEPS project. The Multilateral Instrument allows States to amend simultaneously a wide range of double tax treaties through one single ratification.

The wording of the Multilateral Instrument has been adopted on November 24, 2016 by more than 100 jurisdictions. The OECD expects the signing ceremony to be held in June 2017 and that States should then start with the ratification process. Today, States already prepare lists of double tax treaties they wish to be covered by the Multilateral Instrument.

Key Features des Multilateral Instruments

The Multilateral Instrument contains provisions covering the minimum standards of the BEPS project that supersede existing provisions in double tax treaties. This refers for example to permanent establishments or treaty abuse. However, the Multilateral Instrument also contains provisions on binding arbitration in mutual agreement procedures, which have not yet formed part of the model tax convention until today.

According to Gita Kothari the implementation of the Multilateral Instrument will be efficient, since potentially thousands of double tax treaty should be covered. The Multilateral Instrument only applies to the extent, that it explicitly contradicts to a covered double tax treaty.

The Multilateral Instrument is also flexible insofar as it allows States to make a choice from different optional solutions for the same problem. For example it allows States to either tackle treaty abuse by way of adopting a Principal Purpose Test or alternatively to adopt a LOB Clause or even to combine both.

English and French will be the only authentic languages of the Multilateral Instrument. This will reduce potential conflicts of interpretation and foster a more consistent implementation of the BEPS actions on worldwide scale.  

The endeavour was complex but the result of the negotiations is in the words of Gita Kohari satisfactory since it creates clarity and transparency.

The OECD acts as the depository and collects reservations and lists of covered bilateral treaties from the participating States to guarantee a continuously soft and sound implementation of the Multilateral Instrument. The OECD further develops software to match preference orders of all States and organises matching meetings with States in February 2017.

The OECD will then also visualize the result of the matching exercise and consolidate it with the covered double tax treaties in order to achieve greater legal certainty in the future.


As Gita Kothari correctly states at the beginning of the Webinar the Multilateral Instrument is not a standalone treaty but must be read in a bilateral way with the covered double tax treaties. The digitalisation will considerably facilitate the matching exercises. The concept of the Multilateral Instrument sounds promising. However, it heavily depends on the cooperation and the confidence of the States on one side and on the other side the quality of the text itself in matching the strategic preference orders of the States whether we will call it a success story.