2019 – Posted in: Press Information Bureau

Multilateral Convention to Implement Tax Treaty Related Measures

(Cabinet)

WHAT

The Union Cabinet has approved the ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).

IMPACT

The Multilateral Convention will adjust India’s treaties so as to curb revenur loss through treaty misuse and base erosion and profit shifting strategies by ensuring that benefits are taxed where substantive economic exercises producing the profits are done and where value is made.

ABOUT CONVENTION

India has ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting at Paris in 2017.
The Multilateral Convention to Implement Tax Treaty Related Measures is an outcome of the OECD/ G20 Project to tackle Base Erosion and Profit Shifting i.e., tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no tax being paid.
India was part of the Ad Hoc Group which worked on an equal footing on the finalization of the text of the Multilateral Convention, starting May 2015.
The Convention enables all signatories, to meet treaty-related minimum standards that were agreed as part of the Final BEPS package.
The Convention will operate to modify tax treaties between two or more Parties to the Convention.

BACKGROUND

The Convention is one of the outcomes of the OECD/G20 project, of which India is a member, to tackle base erosion and profit shifting.
The Convention enables countries to implement the tax treaty related changes to achieve anti-abuse BEPS outcomes through the multilateral route without the need to bilaterally re-negotiate.
The ratification of the Multilateral Convention will enable the application of BEPS outcomes through modification of existing tax treaties of India in a swift manner.

Source: PIB

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