4 minute read 21 Nov 2018
Flags entrance OECD chateau (photo courtesy of Michael Dean/OECD)

Why the OECD’s Multilateral Instrument is important

By

Jeffrey Michalak

EY Global International Tax Leader

Passionate about providing exceptional client service. Dedicated to developing and mentoring people to help them achieve their highest potential.

4 minute read 21 Nov 2018

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The Multilateral Instrument (MLI) is evidence of the shift toward a more multilateral mind-set in international taxation.

The MLI is an important part of BEPS implementation, delivering many of the BEPS recommendations and several of the minimum standards through changes to around 3,400 bilateral tax treaties in existence.

Through this innovative instrument, negotiated between 100 jurisdictions but open to all, the changes will be adopted into tax treaties over the coming years, starting as early as 2018.

But while delivering rapid change, the MLI also has the potential to deliver a whole range of unwelcome business outcomes including:

  • Higher costs
  • Constrained funding opportunities
  • The lack of ability to efficiently move funds
  • Greater likelihood of tax disputes
  • Possibly even the need to completely restructure or abandon parts of a business

For business, investment location choices may be based on long-standing organizational routines; one may be familiar with every aspect of investing through a particular location and using particular vehicles.

These routines may no longer be available; putting new routines in place will take time and considerable effort. Companies will therefore need to ask themselves a series of questions, which in turn will permit them to formulate a robust assessment and action plan.

Summary

The MLI is the most subscribed-to instrument ever, delivering BEPS recommendations to around 3,400 tax treaties. 

About this article

By

Jeffrey Michalak

EY Global International Tax Leader

Passionate about providing exceptional client service. Dedicated to developing and mentoring people to help them achieve their highest potential.