Canada, Switzerland ratify instrument to tackle tax avoidance

Canada and Switzerland on August 8 deposited with the OECD their instruments of ratification for the Multilateral Convention to implement tax treaty-related measures to prevent base erosion and profit shifting (BEPS MLI).

The BEPS MLI, negotiated by over 100 countries and jurisdictions, updates the existing network of tax treaties and reduces opportunities for MNE tax avoidance. The BEPS MLI modifies existing bilateral tax treaties to swiftly implement measures relating to hybrid mismatch arrangements, treaty abuse, and permanent establishment.

The BEPS MLI also strengthens provisions to resolve treaty disputes, including through mandatory binding arbitration, which has been taken up by over 25 countries.

Canada and Switzerland have included 84 and 12 of their tax treaties, respectively, to be covered under the BEPS MLI.

The BEPS MLI will enter into force in both countries on December 1, 2019. Both countries signed the BEPS MLI in June 2017.

Till date, a total of 89 tax jurisdictions have signed the BEPS MLI and a total of 33 jurisdictions have ratified the Instrument.