Author: Roxanna Nyiri, National Head of Transfer Pricing and International Tax and Director BDO Johannesburg.
The OECDs base erosion and profit shifting (BEPS) has been at the forefront of international tax discussions over the last number of years. Multinationals are concerned with how they will be affected and how tax authorities will be applying BEPS regulations.
As part of the BEPS Action Plan, the OECD released BEPS Action 15 Developing a Multilateral Instrument (MLI) to Modify Bilateral Tax Treaties. The goal of Action 15 is to streamline the implementation of the tax treaty-related BEPS measures through a multilateral instrument and assist participating countries with the implementation thereof. The MLI sets out to ease the burden of renegotiating over 3000 global tax treaties.
The OECD announced that on 7 June 2017, 76 countries and jurisdictions have signed or expressed intention to sign the Multilateral Convention (MLC) to prevent BEPS. The signing ceremony was held during OECD Week in Paris, France.
South Africa is a signatory country and modifications to existing treaties would most probably enter into effect in early 2018.
The OECD Secretary General indicated that the MLC will put an end to treaty shopping and provide taxpayers with greater certainty through improvements to the Mutual Agreement Procedures. This also provides the tools to implement mandatory binding arbitration, tackle hybrid mismatches, and stop artificial avoidance of permanent establishment status. And, crucially, it goes to the heart of the OECD efforts during this year to help restore citizens trust in the fairness and transparency of global tax governance systems and the legitimacy of the processes underpinning global integration.
The OECDs BEPS measures indicate a global move towards greater governmental cooperation on tax collections and avoidance and increased tax governance measures by multinationals.
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