OECD multilateral instrument comes into effect

The Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting (the so-called multilateral instrument, or MLI) entered into force in India on 1 October 2019.

This initiative, spearheaded by the Organization for Economic Co-operation and Development (OECD) enables parties to concurrently modify their bilateral tax treaties to prevent base erosion and profit shifting. India signed the MLI on 7 June 2017, and thereafter had deposited its instrument of ratification, providing for 93 of its tax treaties to be covered by the MLI.

In accordance with the adoption of the provisions under the MLI by contracting parties, the respective Double Taxation Avoidance Agreements (DTAAs) between such parties shall be modified to the extent of the provisions adopted. In order to provide insight into the impact of the MLI on existing treaties, the OECD recently published the new “Guidance for the Development of Synthesized Texts”.

The business law digest is compiled by Nishith Desai Associates, a research-based international law firm with offices in Mumbai, New Delhi, Bengaluru, Singapore, Silicon Valley, Munich and New York. The firm specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.