The Conference has agreed that as with any international agreement, the MLI shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
The Conference of the Parties to the BEPS Multilateral Instrument (MLI) has approved key guiding principles concerning the interpretation and implementation of the MLI.
The MLI is the first multilateral treaty of its kind, allowing jurisdictions to swiftly transpose results from the BEPS project into their existing tax treaties. The MLI became effective in January 2021, for approximately 650 treaties concluded among the 65 jurisdictions. The MLI so far covers 95 jurisdictions and has been ratified by 65 jurisdictions.
In accordance with Article 31(1) of the MLI, the Conference of the Parties to the MLI is responsible for taking any decisions or exercising any functions as may be required or appropriate under the provisions of the MLI.
The Conference has agreed that as with any international agreement, the MLI shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
Next, the MLI applies alongside existing tax treaties, modifying their application in order to implement the tax treaty-related BEPS measures. This follows the general legal principle that when two rules apply to the same subject matter, the later in time rule prevails.
The Conference has further agreed that the MLI should be interpreted in light of the consent given by each Contracting State to modify their Covered Tax Agreement, as expressed in their MLI Positions and with the consequences set out in the relevant provisions of the MLI.
Finally, it has been agreed that the notification clauses ensure clarity and transparency about the existing provisions of Covered Tax Agreements that are modified by the MLI. While the notifications sometimes trigger the application of the MLI, the extent to which the MLI modifies existing provisions of Covered Tax Agreements is always as provided in the compatibility clauses.
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com