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Convention to Implement Measures to Prevent BEPS (MLI)

Outline and Back Ground of the MLI

1. Outline
- The MLI is intended to introduce the tax treaty related measures, which are part of the measures developed under the BEPS project, into the existing tax treaties between the Parties to the MLI.
- The MLI enables the Parties to implement the tax treaty related measures to prevent BEPS with respect to a large number of their existing tax treaties at the same time and in an efficient manner.
- Measures to prevent BEPS introduced into the existing tax treaties by the MLI consist of (i) measures to prevent tax avoidance conducted through abuse of tax treaties and (ii) measures to eliminate uncertainty for taxpayers such as elimination of double taxation.
- Each of the Parties to the MLI may choose all or part of its existing tax treaties as to be covered by the MLI and under specified conditions all or part of provisions of the MLI regarding the tax treaty related measures to prevent BEPS as to be applicable to their existing tax treaties.


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2. Back Ground
- September 2014:In the reports of the BEPS project, it was recommended to develop a mandate for the formation of an ad hoc Group for the development of a multilateral instrument.
- November 24, 2016:The text of the MLI was adopted by the members of the ad hoc Group.
- June 7, 2017:67 jurisdictions including Japan signed the MLI at the signing ceremony held at Paris.
- May 18, 2018 :The MLI was approved at the 196th session of the Diet in Japan.
- July 1, 2018 :The MLI entered into force for the first 5 jurisdictions that had deposited the instruments of ratification thereof. Hereafter the MLI will enter into force for each of the jurisdictions that subsequently deposits the instrument of ratification.
- September 26, 2018 :Japan deposited the instrument of acceptance. Accordingly, the MLI entered into force on January 1, 2019 for Japan.
- As of July 28, 2022:97 jurisdictions have signed the MLI. 75 of them have deposited the instruments of ratification, acceptance or approval of the MLI.


Key Points of the MLI

1. Measures to Prevent BEPS introduced by the MLI
  Measures to prevent BEPS introduced into the existing tax treaties by the MLI consist of (i) measures to prevent tax avoidance conducted through abuse of tax treaties and (ii) measures to eliminate uncertainty for taxpayers such as elimination of double taxation, which include the tax treaty related measures to prevent BEPS recommended by the final reports of the following Actions of the BEPS project.
Action 2: Neutralising the Effects of Hybrid Mismatch Arrangements
Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstance
Action 7: Preventing the Artificial Avoidance of Permanent Establishment Status
Action 14: Making Dispute Resolution Mechanisms More Effective

2. Tax Treaties covered by the MLI

  Each of the Parties to the MLI may choose all or part of its existing tax treaties as to be covered by the MLI.
  The MLI will apply only to a tax treaty all of the parties to which have chosen that tax treaty as to be covered by the MLI, and will not apply to a tax treaty either party to which is not the Party to the MLI nor has chosen that tax treaty as such.

3. Choice and Application of Measures to Prevent BEPS
  Each of the Parties to the MLI may choose under specified conditions all or part of provisions of the MLI regarding the tax treaty related measures to prevent BEPS as to be applicable to their existing tax treaties.
  Provisions of the MLI, in principle, will apply only to tax treaties all of the parties to which have chosen such provisions as to be applicable to their tax treaties, and will not apply to tax treaties either party to which has not chosen those provisions as such.
  The provisions of the MLI chosen to be applied by a Party to the MLI, in principle, will apply to all of its tax treaties covered by the MLI, and a Party cannot choose to or not to apply such provisions only to its particular tax treaties.
  The provisions of the MLI regarding the tax treaty related measures to prevent BEPS will, where applicable, apply in place of the similar provisions of the existing tax treaties or in addition to the provisions thereof in the absence of such similar provisions.

4. Notification of Choices

  Each of the Parties to the MLI must notify the Depositary of the MLI (the Secretary-General of the OECD) of (i) a list of existing tax treaties to be covered by the MLI and (ii) a list of provisions of the MLI regarding the tax treaty related measures to prevent BEPS to be applicable to its tax treaties at time of either of the signature to the MLI or of the ratification, acceptance or approval of the MLI. A Party to the MLI which does not make such notification at the time of the signature to the MLI must submit provisional lists of them at that time. Each of the Parties to the MLI may extend at any time the list of existing tax treaties to be covered by the MLI.
  The Depositary will make public the notifications and submissions from each of the Parties to the MLI.
 


Signatories of the MLI

《As of July 28, 2022, 97 jurisdictions》

Albania Croatia Israel Morocco Serbia
Andorra Cyprus Italy Namibia Seychelles
Argentina Czech Republic Jamaica
Netherlands (*3)
Singapore
Armenia Denmark Japan New Zealand Slovakia
Australia Egypt Jersey Nigeria Slovenia
Austria Estonia Jordan North Macedonia
South Africa
Bahrain Fiji Kazakhstan Norway Spain
Barbados Finland Kenya Oman Sweden
Belgium France Korea Pakistan Switzerland
Belize Gabon Kuwait Panama Thailand
Bosnia and Herzegovina Georgia Latvia Papua New Guinea Tunisia
Bulgaria Germany Lesotho Peru Turkey
Burkina Faso Greece Liechtenstein Poland Ukraine
Cameroon Guernsey Lithuania Portugal United Arab Emirates
Canada Hungary Luxembourg Qatar United Kingdom
Chile Iceland Malaysia Romania Uruguay
China (*2) India Malta Russia Viet Nam
Colombia Indonesia Mauritius San Marino
Costa Rica Ireland Mexico Saudi Arabia
Côte d'lvoire Isle of Man Monaco Senegal
(*1) The underlined 75 jurisdictions have deposited the instruments of ratification, acceptance or approval of the MLI.
(*2) China has notified that the tax treaties concluded by Hong Kong are covered by the MLI.
(*3) The Netherlands has notified that the tax treaties concluded by Curaçao are covered by the MLI.

Outline of Japan’s Choices of Application of the MLI

  The followings are the outline of the contents of the list regarding Japan's choices of application of the MLI. 
 
1. Jurisdictions which are Parties to the Tax Treaties chosen by Japan as to be Covered by the MLI (42 Jurisdictions)
Australia Germany Korea Pakistan Sweden
Bulgaria Hong Kong Kuwait     Poland Thailand
Canada Hungary Luxembourg    Portugal Turkey
China India Malaysia     Qatar Ukraine
Czech Republic Indonesia Mexico Romania United Arab Emirates
Egypt Ireland Netherlands Saudi Arabia United Kingdom
Fiji Israel New Zealand Singapore
Finland Italy Norway Slovakia
France Kazakhstan Oman South Africa
 
(*)  The underlined are 35 jurisdictions which are parties to the tax treaties as to be covered by the MLI chosen by countries which have deposited the instruments of ratification, acceptance or approval of the MLI as of July 28, 2022.
 
2. Provisions of the MLI chosen to apply by Japan
1) Provisions for application of the MLI to income derived through fiscally transparent entities (Article 3)
2) Provisions for determination of the resident state of a dual resident entity (Article 4)
3) Provisions regarding the wording of the preamble of tax treaties referring to the purposes of the tax treaties (Article 6)
4) Provisions for denial of treaty benefits based on the principal purpose of a transaction (Article 7)
5) Provisions for taxation on capital gains from the alienation of shares or comparable rights deriving their value principally from immovable property (Article 9)
6) Provisions for limitation of benefits for profits attributable to permanent establishments situated in third jurisdictions (Article 10)
7) Provisions regarding artificial avoidance of the permanent establishment status through commissionaire arrangements (Article 12)
8) Provisions regarding artificial avoidance of the permanent establishment status through the specific activity exemptions (Article 13)
9) Provisions for improving mutual agreement procedures (Article 16)
10) Provisions for corresponding adjustments to transfer pricing taxation (Article 17)
11) Provisions for mandatory binding arbitration (Part VI)


3. Provisions of the MLI chosen not to apply by Japan
1) Provisions for limitation of application of the exemption method for eliminating double taxation (Article 5)
2) Provisions for limitation on benefits to persons satisfying certain conditions such as qualified persons (Article 7)
3) Provisions for limitation of application of reduced tax rates to the dividend transfer transactions (Article 8)
4) Provisions for restriction of the taxing right of a jurisdiction on its own residents (Article 11)
5) Provisions regarding artificial avoidance of permanent establishment status through splitting-up of contracts (Article 14)


Application of the MLI to Japan's Tax Treaties


  The MLI applies to an existing tax treaty where both parties to that tax treaty have chosen to apply the MLI to it and where the MLI has entered into force for those parties.
  The provisions of the MLI applicable to an existing tax treaty and the timing of entry into effect of the MLI for it are determined depending on the choices of each of the parties to that tax treaty.
  For details of the application of the MLI to the tax treaties between Japan and the jurisdictions which have already deposited their instruments of ratification, acceptance or approval of the MLI, see the table below.
(*1) The MLI will enter into force on the first day of the month following the expiration of a period of three calendar months beginning on the date of the deposit by the Signatory of its instrument of ratification, acceptance or approval.
(*2) The MLI entered into force on January 1, 2019 for Japan as it deposited its instrument of acceptance on September 26, 2018.
(*3) The applications of the MLI indicated in the table below are based on the reservations and notifications of Japan as of April 21, 2022 and of the other Contracting Jurisdictions submitted on the date set forth below.
(*4) “Summary” in the table below contains descriptions of the tax treaty covered by the MLI, the provisions of the MLI applicable to that tax treaty and the entry into effect of the MLI for that tax treaty.
(*5) “Synthesised Text” in the table below is a document containing the consolidated text of the provisions of a tax treaty (as it may be amended by amending protocols) and the provisions of the MLI applicable to that tax treaty. This document shall be used solely for the purpose of facilitating the understanding of the application of the MLI to a tax treaty and has no legal value.


The Other
Contracting Jurisdiction
Date of Submission
of Reservations
and Notifications
Application of the MLI
Australia 26-09-2018 Summary Synthesised Text
(Japanese(PDF:433KB), English(PDF:207KB))
Canada 29-08-2019 Summary Synthesised Text
(Japanese(PDF:339KB), English(PDF:145KB))
China 25-05-2022 Summary Synthesised Text
(Japanese(PDF:280KB), English(PDF:181KB))
Czech Republic 13-05-2020 Summary Synthesised Text
(Japanese(PDF:267KB), English(PDF:65KB))
Egypt 30-09-2020 Summary Synthesised Text
(Japanese(PDF:292KB), English(PDF:100KB))
Finland 25-02-2019 Summary Synthesised Text
(Japanese(PDF:315KB), English(PDF:135KB)) (*)
France 26-09-2018 Summary Synthesised Text
(Japanese(PDF:407KB)) (*)
Germany 18-12-2020 Summary Synthesised Text
(Japanese(PDF:367KB), English(PDF:201KB))
Hong Kong 25-05-2022 Summary Synthesised Text
(Japanese(PDF:302KB), English(PDF:113KB))
Hungary 25-03-2021 Summary Synthesised Text
(Japanese(PDF:311KB), English(PDF:154KB))
India 25-06-2019 Summary Synthesised Text
(Japanese(PDF:317KB), English(PDF:100KB))
Indonesia 28-04-2020
26-11-2020
Summary (*) Synthesised Text
    (Japanese(PDF:319KB), English(PDF:138KB)) (*)
Ireland 29-01-2019 Summary Synthesised Text
(Japanese(PDF:320KB), English(PDF:149KB))
Israel 13-09-2018 Summary  Synthesised Text
(Japanese(PDF:310KB), English(PDF:126KB))
Kazakhstan 24-06-2020 Summary Synthesised Text (1)
(Japanese(PDF:307KB), English(PDF:135KB))
26-11-2020 Summary Synthesised Text (2)
(Japanese(PDF:308KB), English(PDF:136KB))
Korea 13-05-2020 Summary Synthesised Text
(Japanese(PDF:295KB), English(PDF:80KB))
Luxembourg 09-04-2019 Summary Synthesised Text
(Japanese(PDF:385KB), English(PDF:154KB)) (*)
Malaysia 18-02-2021 Summary Synthesised Text
 (Japanese(PDF:201KB), English(PDF:175KB)) (*)
Netherlands 29-03-2019 Summary Synthesised Text
(Japanese(PDF:381KB), English(PDF:191KB))
New Zealand 27-06-2018 Summary Synthesised Text
(Japanese(PDF:395KB), English(PDF:183KB))
Norway 17-07-2019 Summary Synthesised Text
(Japanese(PDF:302KB), English(PDF:90KB))
Oman 07-07-2020 Summary Synthesised Text
(Japanese(PDF:305KB), English(PDF:103KB))
Pakistan 18-12-2020 Summary Synthesised Text
(Japanese(PDF:320KB), English(PDF:122KB))
Poland 23-01-2018 Summary Synthesised Text
(Japanese(PDF:289KB), English(PDF:139KB))
Portugal 28-02-2020 Summary Synthesised Text
(Japanese(PDF:320KB), English(PDF:164KB))
Qatar 23-12-2019 Summary Synthesised Text
(Japanese(PDF:308KB), English(PDF:106KB))
Romania 28-02-2022 Summary Synthesised Text
(Japanese(PDF:284KB), English(PDF:253KB))
Saudi Arabia 23-01-2020 Summary Synthesised Text
(Japanese(PDF:318KB), English(PDF:178KB))
Singapore 21-12-2018 Summary Synthesised Text
(Japanese(PDF:329KB), English(PDF:156KB))
Slovakia 20-09-2018 Summary Synthesised Text
(Japanese(PDF:297KB), English(PDF:121KB))
Sweden 22-06-2018 Summary Synthesised Text
(Japanese(PDF:332KB), English(PDF:144KB))
Thailand 31-03-2022 Summary Synthesised Text
(Japanese(PDF:334KB), English(PDF:291KB))
Ukraine 08-08-2019 Summary Synthesised Text
(Japanese(PDF:274KB), English(PDF:182KB))
United Arab Emirates 29-05-2019 Summary Synthesised Text
(Japanese(PDF:292KB), English(PDF:172KB))
United Kingdom 29-06-2018 Summary Synthesised Text
(Japanese(PDF:373KB), English(PDF:167KB))

    (*) A Summary or Synthesised Text was partly modified.


Documents relating to the MLI

-The text of the Convention to Implement Measures to Prevent BEPS
“Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting"  (Japanese (PDF:1811KB), English (PDF:280KB))
-List of Reservations and Notifications of Signatories and Parties to the Convention to Implement Measures to Prevent BEPS [link to the website of the OECD]
-List of Reservations and Notifications of Japan (Japanese (provisional)(PDF:491KB) , English(PDF:414KB)) [as of April 21, 2022]
- Mutual agreements between the competent authorities regarding the mode of application of the provisions contained in Part VI (Arbitration) of the MLI
“Implementing arrangements regarding arbitration procedure” [link to the website of the National Tax Agency].

Reference Information