Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the Multilateral Instrument, or the MLI)

 

Official Texts and Explanatory Statement of Multilateral Convention

Design and Function of the Convention

The OECD Depositary

MLI Positions and policy considerations (of individual jurisdictions)

Matrix of Options and Reservations

Date of Entry into Force

Date of Entry into Effect

​​Entry into Effect under Article 35(4) - That Applies to MAP Article

Entry into Effect under Article 35(5) - That Applies to New Covered Tax Agreement

Entry into Effect under Article 35(6) - Reservation for MAP Article

Entry into Effect under Article 35(7) - Reservation for Other Articles

​See more on Multilateral Instrument - Structures and Contents [read]

 

 

 

 


 

 

The Official Texts and Explanatory Statement

 

The multilateral Convention to Implement Tax Related Measures to Prevent Base Erosion and Profit Shifting (the multilateral Instrument, the MLI), developed by the OECD and endorsed by the G20, offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide. The MLI modifies the application of thousands of bilateral tax treaties concluded to eliminate double taxation without creating the opportunity for double non-taxation.

 

Official texts of the MLI [read]

Explanatory Statement [read]

Legal notes on the functioning of the MLI under Public international law [read].

 

 

 

 

Design and Function of the Multilateral Convention

 

The Convention has been designed to strengthen existing tax treaties concluded among its parties without the need for burdensome and time-consuming bilateral renegotiations.

 

Treaty measures that are included in the Convention include those on hybrid mismatch arrangementstreaty abuse and permanent establishment. The Convention also strengthens provisions to resolve treaty disputes, including through mandatory binding arbitration,which has been taken up by 28 signatories as at 7 June 2017.

 

 

 

The OECD Depositary

 

The OECD is the depositary of the Convention and is supporting governments in the process of signature, ratification and implementation. 

 

 

 

MLI Positions and Policy Considerations (by individual country)

 
The MLI position
 

The MLI Position refers to the choices and options made by the Signatory or Party to the MLI and provided to the OECD Depositary on listed tax agreements, reservations and notifications of optional provisions chosen and existing treaty provisions.

 

Each jurisdiction is required to provide a provisional list of tax treaties covered by the Convention (Covered Tax Agreements), reservations and notifications (the "MLI Position") at the time of signature. Each Signatory must prepare and submit its "MLI Position" before signing the MLI. 

 

The MLI Positions provided at the time of signature for the jurisdictions may be subject to changes. The definitive position for each jurisdiction will be provided upon the deposit by the Signatory of its instrument of ratification, acceptance or approval.

 

  • The MLI Positions for each jurisdiction are available [here].
  • For information on the matching of reservations and notifications under the MLI provisions, see the flow chart [here].

 

Policy considerations on MLI position by individual contracting jurisdictions 

 

Policy considerations give explanations for the MLI positions that individual countries (contracting jurisdictions) have adopted with respect to the application of the MLI to tax treaties. One can obtain a better understanding of the MLI position of a contracting jurisdiction by examining the policy formulation process of that contracting jurisdiction.

 

 

 

 


 

Matrix of Options and Reservations

 

On the basis of the MLI positions submitted by the Signatories and Parties, the OECD Secretarial has prepared and maintained a database of the Matrix of Options and Reservations. [read]

 

 

 


 

[1] Introduction to the Entry into Force and Entry into Effect Articles

 

Article 34 contains the provisions for the entry-into-force date of the Convetion with respect to a contracting jurisdiction. 

 

Article 35 contains the provisions for the entry-into-effect dates with respect to the CTAs of a contracting jurisdiction. Article 35(1) divides the modifications into two categories based on the type of taxation to which they apply. Article 35(1)(a) relates to entry into effect provision with respect to the withholding tax, and Article 35(1)(b) relates to the entry into effect provision with respect to taxes other than the withholding taxes. 

 

In what follows, our analysis will cover the application of Article 34 (entry-into-force) and Article 35 (entry-into-effect) to the CTAs of some selected contracting jurisdictions. The concluding comments cover the use of opt-in provisions, opt-out provisions (reservations), and alternative provisions within the contexts of Article 35.

 

 

[2] Article 34 - Entry into Force

 

a) Legal texts of entry-into-force date

 

Article 34(1):  This Convention shall enter into force on the first day of the month following the expiration of a period of three calendar months beginning on the date of deposit of the fifth instrument of ratification, acceptance or approval.

 

Article 34(2): For each Signatory ratifying, accepting, or approving this Convention after the deposit of the fifth instrument of ratification, acceptance or approval, the Convention shall enter into force on the first day of the month following the expiration of a period of three calendar months beginning on the date of the deposit by such Signatory of its instrument of ratification, acceptance or approval.

 

In chronological order, 5 jurisdictions, the Republic of Austria (22 September 2017), the Isle of Man (19 October 2017), Jersey (15 December 2017), Poland (23 January 2018) and Slovenia (22 March 2018), deposited their instruments with the OECD Depositary. Consequently, the Convention came into force on 1st July 2018. That is, the 1st day of the month following the expiration of a period of 3 calendar months beginning on 22 March 2018, the date on which Slovenia deposited the instrument of ratification to the OECD Depositary.

 

On June 2018, 4 more signatories, New Zealand, Serbia, Sweden, and the UK, deposited the instrument of ratification to the OECD depositary on 27th June, 5th June, 22nd June and 29th June respectively. The Convention should enter into force for these 4 jurisdictions on 1st Oct 2018, the first day of the month following the expiration of a period of 3 calendar months that begin on the date of Ratification. 

 

(b) Examples of the entry-into-force date

 

  • The United Kingdom deposited its Instrument of Ratification to the OECD Depositary on 29 June 2018. The MLI shall enter into force on 1 October 2018 with respect to its covered tax agreement (CTAs).
  • Singapore deposited its Instrument of Ratification on 21 December 2018. The MLI shall enter into force on 1 April 2019 with respect to the Singapore’s CTAs.
  • In respect of the Singapore-United Kingdom CTA, the MLI shall enter into force on 1 April 2019, the latest of the dates on which the MLI came into force for each of the contracting jurisdictions.

 

Table 1 – Entry into Force date

 

 

Signature

Deposit ratification instrument

Entry into Force

Status of List

Singapore

7 Jun 2017

21 Dec 2018

1 Apr 2019

Definitive

United Kingdom

7 Jun 2017

29 Jun 2018

1 Oct 2018

Definitive

 

 

 

 
 
[3] Article 35 - Entry into Effect
 
 
a) Legal Texts of Articles 35(1)
 
Article 35(1) is the entry-into-effect date provision. It reads as follows:
 
1. The Convention (the MLI) shall take effect in each contracting jurisdiction with respect to the covered tax agreement:

(a) with respect to taxes withheld at source on amounts paid or credited to non-residents (withholding tax), where the event giving rise to such taxes occurs on or after the first day of the next calendar year that begins on or after the latest of the dates on which the MLI comes into force for each of the contracting jurisdictions to the covered tax agreement (the CTA); and

(b) with respect to all other taxes levied by that contracting jurisdiction, for taxes levied with respect to taxable periods beginning on or after the expiration of a period of 6 calendar months from the latest of the dates on which the MLI comes into force for each of the contracting jurisdictions to the CTA.

 
Article 35(2) is an alternative provision for Articles 35(1)(a) and (5)(a) respectively, and Article 35(3) is an alternative provision for Articles 35(1)(b) and (5)(b). Both Articles 35(2) and (3) read as follows:
 
 
b) Legal texts of Article 35(2) and Article 35(3)
 
 
2. Solely for the purpose of its own application of subparagraph a) of paragraph 1 and subparagraph a) of paragraph 5, a Party may choose to substitute “taxable period” for “calendar year”, and shall notify the Depositary accordingly.
 
 
3. Solely for the purpose of its own application of subparagraph b) of paragraph 1 and subparagraph b) of paragraph 5, a Party may choose to replace the reference to “taxable periods beginning on or after the expiration of a period” with a reference to “taxable periods beginning on or after 1 January of the next year beginning on or after the expiration of a period”, and shall notify the Depositary accordingly.
 
 

Table 2 - Information from the OECD Depositary as of 26 Nov 2019

 

 

Signature

Deposit ratification instrument

Entry into Force

Status of List

Entry-into-effect provision

Alternative Rule

Reservation

Article

35(1)(a)

Article

35(1)(b)

Article

35(2)

Article

35(3)

Article

35(7)(a)

Hong Kong (China)

6/7/2017

 

 

P

 

X

X

 

X

India

6/7/2017

6/25/2019

10/1/2019

D

 

X

X

 

 

Israel

6/7/2017

9/13/2018

1/1/2019

D

 

 

X

X

 

Japan

6/7/2017

9/26/2018

1/1/2019

D

X

X

 

 

 

Malta

6/7/2017

12/18/2018

4/1/2019

D

X

 

 

X

 

Singapore

6/7/2017

12/21/2018

4/1/2019

D

X

X

 

 

 

United Kingdom

6/7/2017

6/29/2018

10/1/2018

D

X

X

 

 

 

Status of List: P=provisional; D=Definitive

 

(A) Table 2 - information from the OECD Depositary on 26 Nov 2019

  • As noted, Article 35(2) applies to Hong Kong, India, and Israel. The design of Article 35(2) is to address the situation that the taxable period of some contracting jurisdictions does not follow the calendar year.
  • As also noted, Israel and Malta have chosen to apply Article 35(3). In total, 9 contracting jurisdictions already deposited the instrument of ratification to the Depositary and chosen to apply article 35(3) to their CTA's. These contracting jurisdictions included Austria, Denmark, Finland, Iceland, Israel, Jersey, Malta, Russia, and Sweden. 

 

(B) Hong Kong’s position on the entry-into-effect option

  • A jurisdiction may enter into reservation under article 35(7)(a) that allows a contracting jurisdiction to replace "the latest of the dates on which this Convention (the MLI) enters into force for each of the Contracting jurisdictions to the Covered Tax Agreement" (referred as "text-A") with "30 days after the date of receipt by the Depositary of the latest notification by each Contracting Jurisdiction making the reservation described in paragraph 7 of Article 35 (Entry into Effect) that it has completed its internal procedures for the entry into effect of the provisions of this Convention with respect to that specific Covered Tax Agreement" ("text-B").
  • From Hong Kong’s perspective, it has adopted Article 35(2) to modify the wording in Article 35(1)(a) by replacing the "calendar year" with "taxable period". It has also adopted Article 35(7)(a) to modify some of the texts in Article 35(1)(b) by replacing text-A with text-B. As Hong Kong has not ratified its position, it is excluded from analysis below.

 

(C) Symmetry and Asymmetry in application of the entry-into-effect date under Article 35 with respect to withholding taxes - Israeli position   

  • Article 35(2) shall apply to the India-Israel CTA symmetrically.
  • In respect of the Israel-Japan CTA, it is observed that Japan has adopted the entry-into-effect provision under Article 35(1)(a) while Israel has unilaterally chosen to replace "calendar year" with "taxable period" pursuant to Article 35(2). Therefore, the entry-into-effect date provision of the Israel-Japan CTA shall apply asymmetrically with respect to the withholding taxes. The same holds for the entry-into-effect date provision of the Israel-Malta CTA, the Israel-Singapore CTA, and the Israel-UK CTA.

 

(D) Adoption of the entry-into-effect provision under Article 35(1)

  • Most of the contracting jurisdictions choose the above entry-into-effect date under Article 35(1)(a) with respect to withholding taxes and 35(1)(b) with respect to other taxes, meaning that the MLI shall take effect symmetrically on the contracting jurisdictions to the CTA. However, some contracting jurisdictions have adopted the alternative rules for the withholding taxes under 35(2) and other taxes under 35(3). The application of a combination of option under Article 35(1) and alternative options will be examined in what follows.

 

 

 

c) Comparison between the use of Article 35(1) and the alternative provision is given below:

 

[i] Illustrated examples - asymmetrical application of Article 35(1)(a) and Article 35(2) with respect to withholding tax, and symmetrical application of Article 35(3) with respect to other taxes

 

Example A: Entry-into-effect date under Malta-Israel CTA

 

 

Malta

Israel

(1)

Date of deposit of instrument of ratification

18 Dec 2018

13 Sept 2018

(2)

CTA - entry into force on 1 Apr 2019

01 April 2019

01 Jan 2019

(3)

CTA Entry into effect (unilateral)

01 Oct 2019

01 July 2019

(4)

CTA Entry into effect (bilateral) – WHT

 

 

 

Article 35(1)(a) applies to WHT, where the event giving rise to WHT occurs on or after 1st day of the next calendar year beginning on or after the later of (2).

01 Jan 2020

 

 

Article 35(2) applies to WHT, where the event giving rise to WHT occurs on or after 1st day of the next taxable period beginning on or after the later of (2).

 

01 April 2019

(taxable period runs from 1st Jan to 31 Dec each year)

(5)

CTA Entry into effect (bilateral) – all other tax (non-WHT)

 

 

 

Article 35(3) applies to non-WHT levied with respect to taxable periods beginning on or after 1 January of the next year (2020) beginning on or after the expiration of a period of 6 calendar months (2019-09-30) from the later of the entry-into-force dates (2019-4-1) in (2) above.

the taxable periods beginning on or after 1 Jan of 2020 

the taxable periods beginning on or after 1 Jan of 2020 

CTA = Covered Tax Agreement, and WHT = withholding tax

 

A) Both Israel and Malta's taxable periods run from 1st January to 31st December each year.

 

B) The Israeli position with respect to Article 35(3)

  • With respect to taxes other than withholding tax as per information in Table 2, Article 35(3) shall apply to the Israel-Malta CTA symmetrically because both of the two contracting jurisdictions have adopted the alternative rule under Article 35(3).
  • However, Article 35(3) shall not apply to the CTAs that Israel has concluded with the following 5 contracting jurisdictions as per Table 2: Hong Kong (provisionally), India, Japan, Singapore, and the United Kingdom because all of these contracting jurisdictions adopt the option under Article 35(1). In this regard, the entry-into-effect provision shall apply to these CTAs asymmetrically.

 

 

 

 

[ii] Illustrated examples - symmetrical application of Article 35(1)(a) and Article 35(1)(b) with respect to withholding tax and other taxes respectively

 
Example B1: Entry-into-effect date under the Japan-Singapore CTA
 

 

 

Singapore

Japan

(1)

Date of deposit of the instrument of ratification

21 Dec 2018

26 Sept 2018

(2)

CTA entry-into-force date 1 April 2019

1 Apr 2019

1 Jan 2019

(3)

CTA Entry into effect (unilateral)

1 Oct 2019

1 July 2019

(4)

CTA Entry into effect (bilateral) - WHT

 

 

 

Article 35(1)(a) applies to WHT, where the event giving rise to WHT occurs on or after 1st day of the next calendar year beginning on or after the later of entry-into-force date in (2).

1 Jan 2020

1 Jan 2020

(5)

CTA Entry into effect (bilateral) - all other tax (non-WHT) 

 

 

 

Article 35(1)(b) applies to non-withholding tax, for taxes levied with respect to the taxable periods beginning on or after the expiration of a period of 6 calendar months (2019-09-30) from the later of the dates in (2) above.

Basis period beginning on or after 1st Oct 2019; see below.

taxable periods beginning on or after 1st Oct 2019. [see bullet below]

 
 
 
A) Taxable periods
  • For individuals, Singapore's taxable period runs concurrently with the calendar year from 1st January to 31st December each year. The tax charged for a particular Year of Assessment is based on income accrued / derived in the calendar year preceding that Year of Assessment. For companies, the basis period is a 12-month period preceding the year of assessment (the taxable period).
  • The Japanese tax or fiscal year runs from 1st Jan to 31st Dec for individuals, and the taxable period for corporations is their business year (i.e. for Toyota, its taxable period is a 12-month period ended on 31st March that is the same as its financial accounting period).
  • Both Japan and Singapore adopt the default provisions under Articles 35(1)(a) and 35(1)(b) with respect to withholding tax and other taxes.
 
 

Example B2: Entry-into-effect date under the Japan-United Kingdom CTA

 

 

 

United Kingdom

Japan

(1)

Date of deposit of instrument of ratification

29 June 2018

26 Sept 2018

(2)

CTA - entry into force on 1 Jan 2019

1st Oct 2018

1st Jan 2019

(3)

CTA Entry into effect (unilateral)

1st Apr 2019

1st July 2019

(4)

CTA Entry into effect (bilateral) - WHT

 

 

 

Article 35(1)(a) applies to WHT, where the event giving rise to WHT occurs on or after 1st day of next calendar year beginning on or after the later of entry-into-force date in (2).

1 Jan 2019

1 Jan 2019

(5)

CTA Entry into effect (bilateral) – all other tax (non-WHT)

 

 

 

Article 35(1)(b) applies to non-withholding tax, for taxes levied with respect to the taxable periods beginning on or after 6 calendar months (2019-7-1) from the later of entry-into-force dates in (2) above.

taxable periods beginning on  or after 1st July 2019

taxable periods beginning on  or after 1st July 2019

 

A) The taxable period for Japanese corporations is their business year. The taxable period for Japanese individuals run from 1st Jan to 31st Dec each year.

 

B) In respect of the United Kingdom, the taxable periods beginning on or after 1st Apr 2020 for corporate tax, and 6 Apr 2020 for income tax and capital gains tax.

 

C) Interpretation of the entry-into-effect date
  • For withholding tax purposes, the entry-into-effect date for Japan falls on the same date as the entry-into-force date under Article 35(1)(a). In that regard, the OECD Secretariat has specifically dealt with this issue, as set out below.
  • Where a second of the pair of contracting jurisdictions deposits its instrument of ratification on a day in September 2018, the date of entry into force of the MLI for that contracting jurisdiction pursuant to Article 34 will be 1 Jan 2019. The question raised is whether the inclusion of the word "next" in Article 35(1)(a) means that, in such a case, the MLI has effect for events giving rise to withholding taxes which occur on or after 1 Jan 2019 or on or after 1 Jan 2020. The Secretariat has clarified that the use of the word "on" can only mean that the date from which the MLI have effect can be the same as the latest of the dates of entry into force. The same reasoning applies to the interpretation of the similar formulations used in Article 35(3) ("... 1 Jan of the next year beginning on or after...") and Article 35(5) ("... the first day of the next calendar year that begins on or after...").
  • See the notes issued by the OECD Secretariat. [here]
 
 
[iii] Illustrated examples - symmetrical application of Article 35(1)(a) with respect to withholding tax, and asymmetrical application of Article 35(1)(b) and Article 35(3) with respect to other taxes
 
 

Solely for purpose of its own application of Article 35(1)(b), a contracting jurisdiction can unilaterally apply the alternative provision for the entry-into-effect date with respect to all other taxes under Article 35(3). As noted, where a contracting jurisdiction to the CTA opts in for Article 35(3) in place of 35(1)(b) while the other contracting jurisdiction adopts the provision under article 35(1), the entry-into-effect provision shall apply asymmetrically with respect to the CTA.

 

As the Explanatory Statement to the MLI clarifies, Article 35(3) is to allow Contracting Jurisdictions to ensure that the entry into effect would take place only after the start of a calendar year. Malta is one of the contracting jurisdictions that opt-in for Article 35(3).

 
 
Example C1: Entry-into-effect date under Malta-Singapore CTA 
 

 

 

Malta

Singapore

(1)

Date of deposit of instrument of ratification

18 Dec 2018

21 Dec 2018

(2)

CTA Entry into force on 1 Apr 2019

1st Apr 2019

1st Apr 2019

(3)

CTA Entry into effect (unilateral)

1st Oct 2019

1st Oct 2019

(4)

CTA Entry into effect (bilateral) for WHT

 

 

 

Article 35(1)(a) applies to WHT, where the event giving rise to WHT occurs on or after 1st day of the next calendar year beginning on or after the later of entry-into-force dates in (2) above.

01 Jan 2020

01 Jan 2020

(5)

CTA Entry into effect (bilateral) for non-WHT

 

 

 

Article 35(1)(b) applies to non-WHT (other taxes) levied with respect to taxable periods beginning on or after 6 calendar months from the later of entry-into-force dates in (2) above.

 

Taxable period that begins on or after 1st  Oct 2019 

 

Article 35(3) applies to non-WHT levied with respect to taxable periods beginning on or after 1 January of the next year (2020) beginning on or after the expiration of a period of 6 calendar months (2019-09-30) from the later of the entry-into-force dates (2019-4-1)

Taxable period that begins on or after 1 Jan 2020 

 

 
 
 
A) In Singapore, the basis period is a 12-month period that precedes the year of assessment. The taxable period or year of assessment runs from 1st Jan to 31st Dec each year. 
 
B) In Malta, the taxable period runs from 1st Jan to 31st Dec each year. 
 
 

Example C2: Entry-into-effect date under Malta-UK CTA

 

 

 

Malta

United Kingdom

(1)

Date of deposit of instrument of ratification

18 Dec 2018

29 Jun 2018

(2)

CTA Entry into force (1 April 2019)

01 April 2019

01 Oct 2018

(3)

CTA Entry into effect (unilateral)

01 Oct 2019

01 Apr 2019

(4)

CTA Entry into effect (bilateral) for WHT

 

 

 

Article 35(1)(a) applies to WHT, where the event giving rise to WHT occurs on or after 1st day of the next calendar year beginning on or after the later of (2).

1 Jan 2020

1 Jan 2020

(5)

CTA Entry into effect (bilateral) for all other tax (non-WHT) 

 

 

 

Article 35(1)(b) applies to non-WHT levied with respect to the taxable periods beginning on or after a period of 6 calendar months (2019-10-1) from the later of (2) above (2019-4-1).

 

taxable periods beginning on or after 1st Oct 2019 

 

Article 35(3) applies to non-WHT, for taxes levied with respect to taxable periods beginning on or after 1 January of the next year (2020) beginning on or after the expiration of a period of 6 calendar months (2019-09-30) from the later of the entry-into-force dates (2019-4-1)

taxable period on or after 1 Jan of 2020 

 

 

Entry-into-effect unilaterally vs bilaterally

  • Malta unilaterally adopts the alternative provision under Article 35(3) solely for its own application of Article 35(1)(b). Accordingly, the entry-into-effect date of Malta, for all other taxes levied with respect to the taxable periods, shall begin on or after 1 January of the next year (2020) beginning on or after the expiration of a period of 6 calendar months from the latest of the dates (1 April 2019) on which the MLI comes into force for each of the contracting jurisdictions to the covered tax agreement.  For the Malta-UK CTA, the first taxable period begins on 1st Jan 2020.
  • The entry-into-effect date for the U.K. shall begin on and after 1 April 2020 unilaterally under Article 35(1)(b). 
  • But for the application of the MLI provision to the Malta-UK CTA, the entry-into-effect date for other taxes levied with respect to taxable period shall begin on or after 1 Oct 2019, which is 6 months from the latest of the entry-into-force date for each of the two contracting jurisdictions. The first taxable period begins on 1 Apr 2020 (corporate tax), and 6 Apr 2020 (income tax and capital gains tax) respectively.
  • In this regard, the entry-into-effect article shall apply asymmetrically with respect to the Malta-United Kingdom covered tax agreement.

 

[iv] Illustrated examples - symmetrical application of entry-into-effect provision under Article 35(2) with respect to withholding tax, and asymmetrical application of entry-into-effect provision under Article 35(1)(b) and Article 35(3) with respect to other taxes

 

Example D: Entry-into-effect date under India-Israel CTA

 

 

 

India

Israel

(1)

Date of deposit of instrument of ratification

25 Jun 2019

13 Sept 2018

(2)

CTA Entry into force on 01 Oct 2019

01 Oct 2019

01 Jan 2019

(3)

CTA Entry into effect (unilateral)

01 April 2020

01 July 2019

(4)

CTA Entry into effect (bilateral) for WHT

 

 

 

Article 35(2) applies to WHT, where the event giving rise to WHT occurs on or after 1st day of the next taxable period beginning on or after the later of (2).

1 Oct 2019

the taxable period runs from 1st Apr to 31st March each year

1 Oct 2019

the taxable period runs from 1st Jan to 31st Dec each year

(5)

CTA Entry into effect (bilateral) for all other tax (non-WHT) 

 

 

 

Article 35(1)(b) Applies to other taxes, for the taxable periods beginning on or after expiration of a period of 6 calendar months from the later of entry-into-force date in (2) above.

01 April 2020

The taxable period runs from 1st April to 31st March in India

 

 

Article 35(3) applies for other taxes (non-WHT) levied with respect to taxable periods beginning on or after 1 January of the next year (2021) beginning on or after the expiration of a period of 6 calendar months (2020-04-01) from the latest of the dates the MLI came into force (2019-10-01) for each of the contracting jurisdictions.

 

 

01 Jan 2021

The taxable period runs from 1st Jan to 31st Dec in Israel

 

A) Both India and Israel adopt the alternative rule under Article 35(2) with respect to withholding taxes. But India adopts article 35(1)(b) and Israel adopts article 35(3) with respect to other taxes. Therefore, the entry-into-effect provision shall apply asymmetrically with respect to other taxes.

 

B) For India, the taxable period runs from 1st April to 31st March each year. For Israel, the taxable period runs from 1st Jan to 31st Dec each year.

 

[v] Illustrated examples - asymmetrical application of entry-into-effect provision under Article 35(1)(a) and Article 35(2) with respect to withholding tax, and asymmetrical application of entry-into-effect provision under Article 35(1)(b) and Article 35(3) with respect to other taxes

 

Example E: Entry-into-effect date under Japan-Israel CTA

 

 

 

Japan

Israel

(1)

Date of deposit of instrument of ratification

26 Sept 2018

13 Sept 2018

(2)

CTA Entry-into-force date

01 Jan 2019

01 Jan 2019

(3)

CTA Entry into effect (unilateral)

01 July 2019

01 July 2019

(4A)

CTA Entry into effect (bilateral) for WHT

 

 

 

Article 35(1)(a) applies to WHT, where the event giving rise to WHT occurs on or after 1st day of next calendar year beginning on or after the later of entry-into-force date in (2).

 

1 Jan 2019

 

 

 

Article 35(2) applies to WHT, where the event giving rise to WHT occurs on or after 1st day of the next taxable period beginning on or after the later of (2).

 

1 Jan 2019

(the taxable period runs from 1st Jan to 31st Dec each year)

(4B)

CTA Entry into effect (bilateral) for all other tax (non-WHT) 

 

 

 

Article 35(1)(b) Applies to other taxes, levied with respect to the taxable periods beginning on or after an expiration of a period of 6 calendar months (2019-07-01) from the later of entry-into-force date in (2) above.

01 July 2019

(the taxable period runs from 1st Jan to 31st Dec for individuals)

 

 

Article 35(3) applies for other taxes (non-WHT) levied with respect to taxable periods beginning on or after 1 January of the next year (2020) beginning on or after the expiration of a period of 6 calendar months (2019-06-30) from the latest of the dates the MLI came into force (2019-01-01) for each of the contracting jurisdictions.

 

 

01 Jan 2020

(the taxable period runs from 1st Jan to 31st Dec in Israel)

 

Country Survey - Article 35(2)

 

As of 26th Sept 2019, 7 countries/jurisdictions have chosen to adopt Article 35(2) with respect to the entry-into-effect provision for withholding taxes.

  • Definitive (entry into force): India and Israel;
  • Provisional (signed but not in force): Hong Kong, Mauritius, Papur New Guinea;
  • To be confirmed: Pakistan, and Denmark

 

Country Survey - Article 35(3)

 

Out of 30 contracting jurisdictions that have signed the MLI,

  • 8 of them have deposited the instrument of ratification confirming that they adopted the alternative rule as provided under Article 35(3) with respect to taxes other than withholding taxes;
  • 20 of them have set out their positions provisionally, but have not deposited the instrument of ratification to bring the MLI into force;
  • 2 of them have not confirmed their positions.

 

    Entry into Effect
Article 35 36
Paragraph 2 3 6 7 2
OECD Depositary       Subparagraph       a  
MLI Matching Database beta        Clause          
No Jurisdiction Signature Deposit ratification instrument Entry into Force Status of List          
1 Austria 6/7/2017 9/22/2017 7/1/2018 Definitive   x      
2 Finland 6/7/2017 2/25/2019 6/1/2019 Definitive   x      
3 Iceland 6/7/2017 9/26/2019 1/1/2020 Definitive   x      
4 Israel 6/7/2017 9/13/2018 1/1/2019 Definitive   x      
5 Jersey 6/7/2017 12/15/2017 7/1/2018 Definitive   x      
6 Malta 6/7/2017 12/18/2018 4/1/2019 Definitive   x      
7 Russia 6/7/2017 6/18/2019 10/1/2019 Definitive   x      
8 Sweden 6/7/2017 6/22/2018 10/1/2018 Definitive   x      
9 Argentina 6/7/2017     Provisional   x      
10 Bulgaria 6/7/2017     Provisional   x      
11 Costa Rica 6/7/2017     Provisional   x      
12 Estonia 6/29/2018     Provisional   x      
13 Croatia 6/7/2017     Provisional   x      
14 Hungary 6/7/2017     Provisional   x      
15 Germany 6/7/2017     Provisional   x      
16 Andorra 6/7/2017     Provisional   x      
17 Indonesia 6/7/2017     Provisional   x      
18 Jamaica 1/24/2018     Provisional   x      
19 Morocco 6/25/2019     Provisional   x      
20 Nigeria 8/17/2017     Provisional   x      
21 Mexico 6/7/2017     Provisional   x      
22 Greece 6/7/2017     Provisional   x      
23 Peru 6/27/2018     Provisional   x      
24 San Marino 6/7/2017     Provisional   x      
25 Senegal 6/7/2017     Provisional   x      
26 Uruguay 6/7/2017     Provisional   x      
27 Italy 6/7/2017     Provisional   x      
28 Romania 6/7/2017     Provisional   x      
29 Chile 6/7/2017     To Be Confirmed   x      
30 Denmark 6/7/2017     To Be Confirmed   x      

 

 

 

[4] Article 35(4): Provision to which Article 16 - Mutual Agreement Procedure applies

 

a) Entry into effect with respect to Mutual Agreement Procedure

 

Article 35(4) provides that Article 16 (MAP) shall have effect with respect to a CTA for a case presented to the competent authority of a contracting jurisdiction on or after the latest of the dates on which the MLI comes into force for each of the contracting jurisdictions to the CTAs, except for cases that were not eligible to be presented as of that date under the CTA prior to its modification by the MLI.  Article 35(4) shall apply without regard to the taxable period to which the case relates.

 

b) Early access to MAP by taxpayers

 

Article 35(4) is a special rule for MAP requests made under Article 16. As the Explanatory Statement to the MLI clarifies, paragraph 4 of Article 35 is intended to ensure that the provision of the MLI apply as soon as possible after the entry into force date, regardless of the taxable period to which a specific case shall apply.

 

The exception as mentioned above is intended to ensure the MLI would not "revive" cases that had been ineligible for MAP prior to the entry into force of the MLI.

 

 

 

[5] Article 35(5): New CTA(s) resulting from an extension under Article 29(5) of the list of covered tax agreements under Article 2(1)(a) 

 

a) Extension of the list of CTAs [after the MLI came into force]

 

Article 35(5) provides that the provisions of this Convention shall have effect in each Contracting Jurisdiction:

a) with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after the first day of the next calendar year that begins on or after 30 days after the date of the communication by the Depositary of the notification of the extension of the list of agreements; and

b) with respect to all other taxes levied by that Contracting Jurisdiction, for taxes levied with respect to taxable periods beginning on or after the expiration of a period of nine calendar months (or a shorter period, if all Contracting Jurisdictions notify the Depositary that they intend to apply such shorter period) from the date of the communication by the Depositary of the notification of the extension of the list of agreements.

 

b) Provision providing for the asymmetric application of Article 35(1) and Article 35(5)

 

Article 35(2) provides that "[s]olely for the purpose of its own application of subparagraph a) of paragraph 1 and subparagraph a) of paragraph 5, a Party may choose to substitute "taxable period" for "calendar year", and shall notify the Depositary accordingly.

 

Article 35(3) provides that "[s]olely for the purpose of its own application of subparagraph b) of paragraph 1 and subparagraph b) of paragraph 5, a Party may choose to replace the reference to "taxable periods beginning on or after the expiration of a period" with a reference to "taxable periods beginning on or after 1 January of the next year beginning on or after the expiration of a period", and shall notify the Depositary accordingly."

 

 

 

[6] Article 35(6): Reservation relating to the application of Article 35(4) to the Mutual Agreement Article

 

Article 35(6) provides that a contracting jurisdiction may reserve the right for Article 35(4) not to apply to its CTAs.

 

Where a contracting jurisdiction makes a reservation under Article 35(6), it chooses not to use the fast track to make a MAP request to the competent authority of either contracting jurisdiction. If so, the normal procedure under article 35(1) shall apply.

 

Country Survey - Article 35(6)

 

Up to 26th September 2019, 29 contracting jurisdictions that have opted out of Article 35(4) not to use the fast track for a MAP request, pursuant to Article 35(6).

  • [Definitive] 9 countries: Finland, Iceland, Israel, Jersey, Russia, Georgia, Guernsey, Isle of Man, Norway
  • [Provisional] 19 countries
  • [to be confirmed] 1 country: Pakistan

 

            Entry into Effect
          Article 35 36
          Paragraph 2 3 6 7 2
OECD Depositary       Subparagraph       a  
MLI Matching Database beta        Clause          
No Jurisdiction Signature Deposit ratification instrument Entry into Force Status of List          
1 Finland 6/7/2017 2/25/2019 6/1/2019 Definitive     x    
2 Iceland 6/7/2017 9/26/2019 1/1/2020 Definitive     x    
3 Israel 6/7/2017 9/13/2018 1/1/2019 Definitive     x    
4 Jersey 6/7/2017 12/15/2017 7/1/2018 Definitive     x    
5 Russia 6/7/2017 6/18/2019 10/1/2019 Definitive     x    
6 Georgia 6/7/2017 3/29/2019 7/1/2019 Definitive     x    
7 Guernsey 6/7/2017 2/12/2019 6/1/2019 Definitive     x    
8 Isle of Man 6/7/2017 10/25/2017 7/1/2018 Definitive     x    
9 Norway 6/7/2017 7/17/2019 11/1/2019 Definitive     x    
10 Bulgaria 6/7/2017     Provisional     x    
11 Costa Rica 6/7/2017     Provisional     x    
12 Croatia 6/7/2017     Provisional     x    
13 Hong Kong (China) 6/7/2017     Provisional     x    
14 Hungary 6/7/2017     Provisional     x    
15 Germany 6/7/2017     Provisional     x    
16 Indonesia 6/7/2017     Provisional     x    
17 Malaysia 1/24/2018     Provisional     x    
18 Mauritius 7/5/2017     Provisional     x    
19 Mexico 6/7/2017     Provisional     x    
20 Panama 1/24/2018     Provisional     x    
21 Greece 6/7/2017     Provisional     x    
22 San Marino 6/7/2017     Provisional     x    
23 Senegal 6/7/2017     Provisional     x    
24 Uruguay 6/7/2017     Provisional     x    
25 Seychelles 6/7/2017     Provisional     x    
26 Turkey 6/7/2017     Provisional     x    
27 Portugal 6/7/2017     Provisional     x    
28 Romania 6/7/2017     Provisional     x    
29 Pakistan 6/7/2017     To Be Confirmed     x    

 

 

 

 

[7] Article 35(7): Reservations relating to the application of Article 35(7)(a)(i) and (ii) to articles 35(1), (4), and (5)

 

Article 35(7)(a) provides that a contracting jurisdiction may reserve the right to replace

 

i) the references in paragraphs 1 and 4 to "the latest of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement"; and

ii) the references in paragraph 5 to "the date of the communication by the Depositary of the notification of the extension of the list of agreements";

 

with reference to "30 days after the date of receipt by the Depositary of the latest notification by each Contracting Jurisdiction making the reservation described in paragraph 7 of Article 35 (Entry into Effect) that it has completed its internal procedures for the entry into effect of the provisions of this Convention with respect to that specific Covered Tax Agreement".

 

Table E1: Reservations that a contracting jurisdiction may choose to make with respect to the covered tax agreements, pursuant to Articles 35(7)(a)(i) to 35(7)(a)(vi)

Provisions under Articles 28, 29, 35 excluding 35(7)(a), and 36

Provisions under Article 35(7)(a)

Article 35

Article 35(7)

(a) A Party may reserve the right to replace:

1. The provisions of this Convention shall have effect in each Contracting Jurisdiction with respect to a Covered Tax Agreement:

a) with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after the first day of the next calendar year that begins on or after the latest of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement; and

b) with respect to all other taxes levied by that Contracting Jurisdiction, for taxes levied with respect to taxable periods beginning on or after the expiration of a period of six calendar months (or a shorter period, if all Contracting Jurisdictions notify the Depositary that they intend to apply such shorter period) from the latest of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement.

4. Notwithstanding the preceding provisions of this Article, Article 16 (Mutual Agreement Procedure) shall have effect with respect to a Covered Tax Agreement for a case presented to the competent authority of a Contracting Jurisdiction on or after the latest of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement, except for cases that were not eligible to be presented as of that date under the Covered Tax Agreement prior to its modification by the Convention, without regard to the taxable period to which the case relates.

5. For a new Covered Tax Agreement resulting from an extension pursuant to paragraph 5 of Article 29 (Notifications) of the list of agreements notified under clause ii) of subparagraph a) of paragraph 1 of Article 2 (Interpretation of Terms), the provisions of this Convention shall have effect in each Contracting Jurisdiction:

a) with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after the first day of the next calendar year that begins on or after 30 days after the date of the communication by the Depositary of the notification of the extension of the list of agreements; and

b) with respect to all other taxes levied by that Contracting Jurisdiction, for taxes levied with respect to taxable periods beginning on or after the expiration of a period of nine calendar months (or a shorter period, if all Contracting Jurisdictions notify the Depositary that they intend to apply such shorter period) from the date of the communication by the Depositary of the notification of the extension of the list of agreements

i) the references in Articles 35(1) and (4) to “the latest of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement”; and

ii) the references in Article 35(5) to “the date of the communication by the Depositary of the notification of the extension of the list of agreements”;

with references to “30 days after the date of receipt by the Depositary of the latest notification by each Contracting Jurisdiction making the reservation described in paragraph 7 of Article 35 (Entry into Effect) that it has completed its internal procedures for the entry into effect of the provisions of this Convention with respect to that specific Covered Tax Agreement”;

Article 28 (Reservations), paragraphs (9)(a) and (b)

 

9. Any Party which has made a reservation in accordance with paragraph 1 or 2 may at any time withdraw it or replace it with a more limited reservation by means of a notification addressed to the Depositary. Such Party shall make any additional notifications pursuant to paragraph 6 of Article 29 (Notifications) which may be required as a result of the withdrawal or replacement of the reservation. Subject to paragraph 7 of Article 35 (Entry into Effect), the withdrawal or replacement shall take effect:

a) with respect to a Covered Tax Agreement solely with States or jurisdictions that are Parties to the Convention when the notification of withdrawal or replacement of the reservation is received by the Depositary:

i) for reservations in respect of provisions relating to taxes withheld at source, where the event giving rise to such taxes occurs on or after 1 January of the year next following the expiration of a period of six calendar months beginning on the date of the communication by the Depositary of the notification of withdrawal or replacement of the reservation; and

ii) for reservations in respect of all other provisions, for taxes levied with respect to taxable periods beginning on or after 1 January of the year next following the expiration of a period of six calendar months beginning on the date of the communication by the Depositary of the notification of withdrawal or replacement of the reservation; and

b) with respect to a Covered Tax Agreement for which one or more Contracting Jurisdictions becomes a Party to this Convention after the date of receipt by the Depositary of the notification of withdrawal or replacement: on the latest of the dates on which the Convention enters into force for those Contracting Jurisdictions.

iii) the references in Article 28(9)(a) to “on the date of the communication by the Depositary of the notification of withdrawal or replacement of the reservation”; and

iv) the reference in Article 28(9)(b) to “on the latest of the dates on which the Convention enters into force for those Contracting Jurisdictions”;

 

with references to “30 days after the date of receipt by the Depositary of the latest notification by each Contracting Jurisdiction making the reservation described in paragraph 7 of Article 35 (Entry into Effect) that it has completed its internal procedures for the entry into effect of the withdrawal or replacement of the reservation with respect to that specific Covered Tax Agreement”;

Article 29 (Notifications), paragraphs (6)(a) and (b)

 

6. A Party may make additional notifications pursuant to subparagraphs b) through s) of paragraph 1 by means of a notification addressed to the Depositary. These notifications shall take effect:

a) with respect to Covered Tax Agreements solely with States or jurisdictions that are Parties to the Convention when the additional notification is received by the Depositary:

i) for notifications in respect of provisions relating to taxes withheld at source, where the event giving rise to such taxes occurs on or after 1 January of the year next following the expiration of a period of six calendar months beginning on the date of the communication by the Depositary of the additional notification; and

ii) for notifications in respect of all other provisions, for taxes levied with respect to taxable periods beginning on or after 1 January of the year next following the expiration of a period of six calendar months beginning on the date of the communication by the Depositary of the additional notification; and

b) with respect to a Covered Tax Agreement for which one or more Contracting Jurisdictions becomes a Party to this Convention after the date of receipt by the Depositary of the additional notification: on the latest of the dates on which the Convention enters into force for those Contracting Jurisdictions.

v) the references in subparagraph a) of paragraph 6 of Article 29 (Notifications) to “on the date of the communication by the Depositary of the additional notification”; and vi) the reference in subparagraph b) of paragraph 6 of Article 29 (Notifications) to “on the latest of the dates on which the Convention enters into force for those Contracting Jurisdictions”;

with references to “30 days after the date of receipt by the Depositary of the latest notification by each Contracting Jurisdiction making the reservation described in paragraph 7 of Article 35 (Entry into Effect) that it has completed its internal procedures for the entry into effect of the additional notification with respect to that specific Covered Tax Agreement”;

 

Sub-paragraphs vii), viii), ix), and x) of Article 35(7)(a) shall apply to the provisions of Article 36 (Arbitration) in the same way as above.

Table E2: Reservations that a contracting jurisdiction may choose to make with respect to the covered tax agreements, pursuant to Articles 35(7)(a)(vii) to 35(7)(a)(x)

Provisions

Provisions Replaceable under Article 35(7)(a)

Article 36

Article 35(7)

(a) A Party may reserve the right to replace:

1. Notwithstanding paragraph 9 of Article 28 (Reservations), paragraph 6 of Article 29 (Notifications), and paragraphs 1 through 6 of Article 35 (Entry into Effect), with respect to two Contracting Jurisdictions to a Covered Tax Agreement, the provisions of Part VI (Arbitration) shall have effect:

a) with respect to cases presented to the competent authority of a Contracting Jurisdiction (as described in subparagraph a) of paragraph 1 of Article 19 (Mandatory Binding Arbitration)), on or after the later of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement; and

b) with respect to cases presented to the competent authority of a Contracting Jurisdiction prior to the later of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement, on the date when both Contracting Jurisdictions have notified the Depositary that they have reached mutual agreement pursuant to paragraph 10 of Article 19 (Mandatory Binding Arbitration), along with information regarding the date or dates on which such cases shall be considered to have been presented to the competent authority of a Contracting Jurisdiction (as described in subparagraph a) of paragraph 1 of Article 19 (Mandatory Binding Arbitration)) according to the terms of that mutual agreement.

2. A Party may reserve the right for Part VI (Arbitration) to apply to a case presented to the competent authority of a Contracting Jurisdiction prior to the later of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement only to the extent that the competent authorities of both Contracting Jurisdictions agree that it will apply to that specific case.

vii) the references in paragraphs 1 and 2 of Article 36 (Entry into Effect of Part VI) to “the later of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement”;

with references to “30 days after the date of receipt by the Depositary of the latest notification by each Contracting Jurisdiction making the reservation described in paragraph 7 of Article 35 (Entry into Effect) that it has completed its internal procedures for the entry into effect of the provisions of this Convention with respect to that specific Covered Tax Agreement”; and

3. In the case of a new Covered Tax Agreement resulting from an extension pursuant to paragraph 5 of Article 29 (Notifications) of the list of agreements notified under clause ii) of subparagraph a) of paragraph 1 of Article 2 (Interpretation of Terms), the references in paragraphs 1 and 2 of this Article to “the later of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement” shall be replaced with references to “the date of the communication by the Depositary of the notification of the extension of the list of agreements”.

4. A withdrawal or replacement of a reservation made under paragraph 4 of Article 26 (Compatibility) pursuant to paragraph 9 of Article 28 (Reservations), or the withdrawal of an objection to a reservation made under paragraph 2 of Article 28 (Reservations) which results in the application of Part VI 47 (Arbitration) between two Contracting Jurisdictions to a Covered Tax Agreement, shall have effect according to subparagraphs a) and b) of paragraph 1 of this Article, except that the references to “the later of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement” shall be replaced with references to “the date of the communication by the Depositary of the notification of withdrawal of the reservation”, “the date of the communication by the Depositary of the notification of replacement of the reservation” or “the date of the communication by the Depositary of the notification of withdrawal of the objection to the reservation”, respectively.

5. An additional notification made pursuant to subparagraph p) of paragraph 1 of Article 29 (Notifications) shall have effect according to subparagraphs a) and b) of paragraph 1, except that the references in paragraphs 1 and 2 of this Article to “the later of the dates on which this Convention enters into force for each of the Contracting Jurisdictions to the Covered Tax Agreement” shall be replaced with references to “the date of the communication by the Depositary of the additional notification”.

viii) the reference in Article 36(3) (Entry into Effect of Part VI) to “the date of the communication by the Depositary of the notification of the extension of the list of agreements”;

ix) the references in Article 36(4) (Entry into Effect of Part VI) to “the date of the communication by the Depositary of the notification of withdrawal of the reservation”, “the date of the communication by the Depositary of the notification of replacement of the reservation” and “the date of the communication by the Depositary of the notification of withdrawal of the objection to the reservation”; and

x) the reference in Article 36(5) (Entry into Effect of Part VI) to “the date of the communication by the Depositary of the additional notification”;

with references to “30 days after the date of receipt by the Depositary of the latest notification by each Contracting Jurisdiction making the reservation described in paragraph 7 of Article 35 (Entry into Effect) that it has completed its internal procedures for the entry into effect of the provisions of Part VI (Arbitration) with respect to that specific Covered Tax Agreement”.

 

Contracting jurisdictions that choose to adopt the reservations listed from Article 35(7)(a)(i) to Article 35(7)(a)(x) as at 26th September 2019 includes:

  • [Definitive] Russia, Sweden, Switzerland;
  • [Provisional] Andorra, Cyprus, Estonia, Hong Kong, Germany, Italy, Latvia, Liechtenstein, Romania, Spain

 

[8] Concluding Comments

 

Article 35 of the MLI contains 2 types of options: opt-out (reservations) provisions and alternative provisions. Article 35(4) contains a special rule under which the taxpayer can present a MAP request for a case that occurs on or after the entry-into-force date. Article 35(6) contains an opt-out provision providing that a contracting jurisdiction may choose not to apply the special rule under Article 35(4) that provides early access to a taxpayer who is eligible for a MAP request under Article 16(1).

 

Article 35(2) and (3) respectively contains two alternative provisions that a contracting jurisdiction is free to apply to its CTAs for the purpose of the practical administration of domestic tax rules and entry-into-effect provision of the MLI.

 

Article 35(2) and article (3) are type of non-default opt-in provisions. Opt-in provisions are contained in other articles of the MLI such as paragraph 3 of Article 6 (Purpose of a Covered Tax Agreement), and paragraph 1 of Article 7 (Prevention of Treaty Abuse). There is a distinction between articles 6(3) and 7(1). Article 6(3) is a non-default option for which a contracting jurisdiction is free to choose while article 7(1) is a default option in respect of which a contracting jurisdiction has no freedom to choose because adopting Article 7(1) is one of the requirements for it to meet the minimum standards under the OECD/G20 BEPS project.

 

For purpose of the application of entry-into-effect provision under article 35(1), if a contracting jurisdiction adopts an alternative provision either under Articles 35(2) or (3) and the other contracting jurisdiction does not do so, the entry-into-effect provision of that CTA shall apply asymmetrically. The provision of the two alternative provisions is an exception to the reciprocity principle under Article 21(1) of the Vienna Convention on the Law of Treaties. Both Articles 35(2) and (3) are types of an alternative provision that is a non-default opt-in provision. The design of an alternative option serves the purpose that the alternative provision is provided as another way of doing the same thing for flexibility sake.

 

 

 


 

BEPS Cases - tax avoidance and less than single taxation by treaty abuse

 

  • How Google France took advantage of gaps in tax treaties between France and Ireland [read]
  • How Apple Company has been engaged in tax avoidance globally [read-Chinese version]