Signing of multilateral convention: another milestone in the BEPS Action Plan


The signing ceremony of the multilateral convention to implement tax treaty related measures to prevent Base Erosion and Profit Shifting (BEPS) took place on 7 June 2017 in Paris.

Multilateral convention facilitates implementation of BEPS Action Plan

68 countries – including Hungarysigned the multilateral convention, while another 9 countries have expressed their intention to sign. Although the convention has been signed, it has not yet entered into force. This will happen on the first day of the 4th month after it has been ratified by at least 5 countries. Interestingly, although the United States was involved in drafting the multilateral convention, they were not among the countries signing it on 7 June.

The multilateral convention is aimed at implementing and applying the BEPS Action Plan without having to amend thousands of bilateral agreements in force between the signatory countries one by one.

Besides the mandatory requirements, the multilateral convention also includes so-called options, which means that countries can freely decide whether to apply these recommendations, and which bilateral agreements reached with other countries they will apply them for. OECD will keep a separate database to monitor which provisions of the multilateral convention countries wish to apply, and in relation to which bilateral agreements.

Ratification required to apply convention

In terms of bilateral agreements between two countries, the provisions of the multilateral convention may only be applied, if the relevant provisions have been ratified by both countries. Considering the procedures, the earliest application date is likely to be 1 January 2019.

Since the ratified provisions of the multilateral convention will not be transposed into the bilateral agreements, when examining cross-border transactions in future it will important to review – besides the bilateral agreements themselves – whether the multilateral convention is already in force in the given country, and if so, which provisions have been approved by the countries involved.

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