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As a result of the BEPS discussion, the OECD decided to modify its Model Tax Convention (MTC). All the bilateral treaties concluded on the basis of the old MTC are being amended through a Multilateral Instrument (MLI). The MLI entered into force on 1 July 2018 for the first signatory countries, but many countries are still ratifying it up to this date.
As a result of the BEPS discussion, the OECD decided to modify its Model Tax Convention (MTC). All the bilateral treaties concluded on the basis of the old MTC are being amended through a Multilateral Instrument (MLI). The MLI entered into force on 01 July 2018 for the first signatory countries, but many countries are still ratifying it up to this date.
An updated list of countries which have signed the MLI so far and dates it entered or will enter into force for each country can be found here.
With the MLI, there is now two different layers to consider in order to check the applicable law of a certain international tax case: the first layer is the bilateral treaty, and the second layer is the MLI. However, it is not that simple. There are some limits to the applicability of the MLI: it is only applicable if all the parties involved in a specific situation have ratified it and included each other in their list of “covered tax agreements” (CTAs).
This means that countries intending to ratify the MLI have to make a list of CTAs, that is, a list with their bilateral treaties that they want to be amended by the MLI. Therefore, the MLI will only affect the bilateral treaties explicitly specified by each country, provided that both parties have included each other in their CTAs (hereinafter referred to as “CTA partners”). Otherwise, the applicable law remains the existing bilateral tax treaty.