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UK makes changes to international tax treaty notifications

The UK has announced a number of modifications to the provisional list of "reservations and notifications" related to the entry into force of the multilateral instrument (MLI) on international tax treaty related measures.18 Apr 2018

The proposed amendments correct errors in the UK's original notifications; list agreements entered into between the UK and other jurisdictions since the MLI was signed, and that were omitted from the original list in error. It also removes the double tax treaty between the UK and Germany from the list of treaties that will be amended on entry into force of the MLI, as the two countries have instead agreed to make the necessary changes through a bilateral arrangement.

The UK was one of the first 68 countries to sign the MLI, also known as the Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, on 7 June 2017. The MLI will enter into force on 1 July as it has now been ratified by five countries.

The UK has not yet completed the legislative procedures to bring it into force, but once it has done so it will notify the Organisation for Economic Cooperation and Development, and provide its final list of reservations and notifications at the same time. The MLI will then enter into force in the UK three months later.

The MLI is part of the OECD's wider base erosion and profit shifting (BEPS) project. Once each signatory country brings it into force, the MLI will enable over a thousand double tax treaties to be interpreted in a way that implements the OECD's recommendations for treaty changes. These changes include measures designed to prevent the use of treaties for tax avoidance, and improved tax dispute resolution procedures.

Each country which signs the MLI must specify the treaties which will be covered by the instrument. It will only apply where both parties to the treaty have chosen to apply the MLI to the relevant treaty, and where any options they have chosen are compatible. The OECD is developing an online database to show how the MLI is likely to affect a specific tax treaty by matching information from signatories' MLI positions.

As well as removing the treaty with Germany from the list of treaties that will be covered by the MLI, the UK has also proposed to bring treaties with the Faroe Islands, Kyrgyzstan, Ukraine and the United Arab Emirates within its scope.