OECD MLI

1 The Multilateral Instrument to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) is one action by the OECD to address tax-base erosion and profit shifting (BEPS), i.e., double non-taxation or strategies consisting of artificially shifting profits to low-tax locations where there is no substantial economic activity and at the same time, very little corporate tax being paid. MLI aims to modify bilateral double-taxation agreements. It is an international agreement that modifies, in an umbrella manner, the relevant provisions of bilateral double-taxation agreements. Standard clauses contained in the MLI should replace, modify or supplement the relevant clauses in bilateral agreements. MLI marks a new opening in international tax law, offering for the first time the ability to harmonise the rules governing cross-border taxation.

Domestic responses against international tax avoidance have sharply increased in the latest years worldwide (in this sense, DAC 6-type rules are worth mentioning).
In this contest, GAAR shopping by competent authorities and tax administrations is a great challenge. These agencies are often inclined to pile up anti-avoidance rules of a treaty or domestic nature without any hierarchy or prevalence of application, and to surf back and forth on them to enhance the scope of the taxable event and revenue collection to its maximum possible reach.
As a refinement of previously existing domestic GAAR, bilateral and multilateral (MLI) treaty anti-abuse responses have established a set of standards for transactions under the treaty umbrella that might create an overlapping effect, and hence, increase uncertainty unless sound ordering principles are followed in their application.
Some ordering principles are advanced in MLI itself, but others must be developed considering the nuances of each jurisdiction’s domestic rules and treaty network, as demonstrated in the attached discussion which is particularly focused on Argentina.

The Multilateral Convention to Implement Tax treaty Related measures to prevent BEPS rounded up the implementation of the treaty-based final BEPS outcomes in one single document. MLI is aimed at providing a framework that could allow amending existing bilateral treaties at once, bringing them in line with BEPS treaty-related minimum standard and recommendations without the need to endeavor complex and lengthy bilateral renegotiations. In a historical signing ceremony hosted by OECD on June 7, last, 76 countries and jurisdictions signed or expressed their intention to sign MLI. Notably absences include the United States of America and, in LatAm, Brazil and Peru. MLI does not establish a single uniform set of tax rules, but rather offers significant options to signing jurisdictions; thus, MLI does not achieve full global convergence on treaty-based BEPS measures; even minimum standards on treaty abuse and mutual agreement procedure keep some degree of optionality.