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.