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Convention to Implement Measures to Prevent BEPS (MLI)

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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 enterd into force on 
January 1, 2019 for Japan.
- As of August 29, 2019:87 jurisdictions have signed the MLI. 32 of them have deposited the instruments of 
ratification.


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.
  The Depositary will make public the notifications and submissions from each of the Parties to the MLI.
 


Signatories of the MLI

《As of August 29, 2019, 87 jurisdictions》

AlbaniaAndorraArgentinaArmeniaAustralia
AustriaBarbadosBelgiumBelizeBulgaria
Burkina FasoCameroonCanadaChileChina(*2)
ColombiaCosta RicaCote d’lvoireCroatiaCyprus
CzechDenmarkEgyptEstoniaFiji
FinlandFranceGabonGeorgiaGermany
GreeceGuernseyHungaryIcelandIndia
IndonesiaIrelandIsle of ManIsraelItaly
JamaicaJapanJerseyKazakhstanKorea
KuwaitLatviaLiechtensteinLithuaniaLuxembourg
MalaysiaMaltaMauritiusMexicoMonaco
MoroccoNetherlands(*3)New ZealandNigeriaNorway
PakistanPanamaPapua New GuineaPeruPoland
PortugalQatarRomaniaRussiaSan Marino
Saudi ArabiaSenegalSerbiaSeychellesSingapore
SlovakiaSloveniaSouth AfricaSpainSweden
SwitzerlandTunisiaTurkeyUkraineUnited Arab
Emirates
United KingdomUruguay

(*1)The underlined 32 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 (39 Jurisdictions)
AustraliaBulgaria    CanadaChinaCzech
EgyptFiji    FinlandFranceGermany
Hong KongHungary    IndiaIndonesiaIreland
IsraelItaly    KazakhstanKoreaKuwait
LuxembourgMalaysia    MexicoNetherlandsNew Zealand
NorwayPakistan    PolandPortugalRomania
Saudi ArabiaSingapore    SlovakiaSouth AfricaSweden
TurkeyUkraine    United Arab
    Emirates
United Kingdom
 
 (*)  The underlined 18 jurisdictions have deposited the instruments of ratification, acceptance or approval of the MLI as of August 29, 2019.
 
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
          submitted by Japan on September 26, 2018 and by the other Contracting Jurisdictions 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) “Synthesized 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
Contacting
Jurisdiction
Date of Submission
of Reservations
and Notifications
Application of the MLI
Australia26-09-2018     SummarySynthesized Text
(Japanese(PDF:335KB), English(PDF:207KB))
Canada29-08-2019     SummarySynthesized Text
(in preparation)
Finland25-02-2019     SummarySynthesized Text
(Japanese(PDF:314KB), English(PDF:135KB))
France26-09-2018     SummarySynthesized Text
(Japanese(PDF:272KB))
India25-06-2019     SummarySynthesized Text
(Japanese(PDF:317KB),English(PDF:100KB))
Ireland29-01-2019     SummarySynthesized Text
(Japanese(PDF:215KB), English(PDF:149KB))
Israel13-09-2018     Summary  Synthesized Text
(Japanese(PDF:248KB), English(PDF:126KB))
Luxembourg09-04-2019     Summary  Synthesized Text
(Japanese(PDF:226KB), English(PDF:154KB))
Netherlands29-03-2019     Summary  Synthesized Text
(Japanese(PDF:253KB), English(PDF:191KB))
New Zealand27-06-2018     SummarySynthesized Text
(Japanese(PDF:304KB), English(PDF:183KB))
Norway17-07-2019     SummarySynthesized Text
(in preparation)
Poland23-01-2018     Summary Synthesized Text
(Japanese(PDF:226KB), English(PDF:139KB))
Singapore21-12-2018     SummarySynthesized Text
(Japanese(PDF:223KB), English(PDF:156KB))
Slovakia20-09-2018     SummarySynthesized Text
(Japanese(PDF:215KB), English(PDF:121KB))
Sweden22-06-2018     SummarySynthesized Text
(Japanese(PDF:246KB), English(PDF:144KB))
Ukraine08-08-2019     SummarySynthesized Text
(in preparation)
United Arab Emirates29-05-2019     SummarySynthesized Text
(Japanese(PDF:296KB), English(PDF:172KB))
United Kingdom29-06-2018     Summary Synthesized Text
(Japanese(PDF:287KB), English(PDF:167KB))

    (*) A Synthesized Text was partially 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:256KB) , English (PDF:236KB))

Reference Information