BEPS Action 15 – Multilateral Convention published | KPMG | UK
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BEPS Action 15 – Multilateral Convention published

BEPS Action 15 – Multilateral Convention published

The Convention will allow Governments to bring their treaties in line with aspects of the BEPS project without renegotiating individual treaties.


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On Thursday 25 November 2016, pursuant to Action 15 of the Base Erosion and Profit Shifting (BEPS) initiative, the OECD published the Multilateral Convention (the Convention) that is intended to implement the treaty-related aspects of the initiative without needing to update/renegotiate individual tax treaties. The Convention is the product of an ‘ad hoc group’, in which 99 countries participated as full members, supported by several non-state jurisdictions and international and regional organisations. The Group was chaired by Mike Williams of HM Treasury in the UK.

The Convention applies in relation to a treaty (Covered Tax Agreement) where both contracting states (the Parties) have notified the Secretary General of the OECD (the Depositary) that they intend the Convention to apply to it. In relation to BEPS minimum standards (for example, in relation to treaty abuse, Principal Purpose Test or full Limitation of Benefits clause), such minimum standard is to apply automatically, with limited exceptions, to all Covered Tax Agreements.

In relation to provisions which are not minimum standards (for example, the changes to the definition of permanent establishment), a Party to the Convention is entitled to opt out of that provision by expressing a ‘reservation’; this has the effect that the provision in question does not apply to any of that party’s treaties.

Governments are currently preparing their lists of treaties to be covered by the Convention and are considering which options to select and reservations to make. 

A signing ceremony is expected to take place in early June 2017, and the Convention will then enter into force after five countries have ratified, accepted or approved it. In terms of its application to any given tax treaty, it will enter into effect after all parties to that treaty have ratified the instrument and acertain period (defined by the Convention) has passed, to ensure clarity and legal certainty. Taking all of this into account, it is anticipated that the Convention could apply as early as 1 January 2018 for withholding taxes, and for taxable periods beginning on or after 1 April 2018 for other treaty purposes.

An Explanatory Statement has been published together with the text of the Convention, with further guidance to be developed by the OECD in due course. For more information on the Convention, KPMG in the UK have prepared an overview on the content of the Convention, along with our view. KPMG’s EU Tax Centre have also prepared a Euro Tax Flash.

We are also planning a webinar for 12 December 2017, where we will discuss the Multilateral Convention in more detail –registration information will follow in a future edition of Tax Matters Digest.

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