March 20, 2020

The Multilateral Instrument and Its Applicability in India

March 20, 2020/ Ruchelman P.L.L.C.

One of the most significant outcomes of the B.E.P.S. Project is the signing of the multilateral instrument (“M.L.I.”) in 2017. The O.E.C.D. initiated the B.E.P.S. Project in 2013 with a view to curtail tax avoidance. The M.L.I. addresses B.E.P.S. concerns in thousands of bilateral tax treaties through one common treaty. India has been at the forefront of implementing B.E.P.S. measures, and India’s covered tax treaties will need to be read with the M.L.I. from April 1, 2020. Sakate Khaitan of Khaitan Legal Associates, Mumbai, India, and Abbas Jaorawala, a chartered accountant and consultant to that firm, explain India’s positions on various provisions of the M.L.I. for those engaged in trade or investment opportunities relating to India.

November 29, 2018

Alta Energy Affirms Treaty Benefits: A Canadian Case Study for Applying the M.L.I.

November 29, 2018/ Ruchelman P.L.L.C.

As part of its attack on B.E.P.S., the O.E.C.D. published its Multilateral Instrument, a device that revised more than 1,200 income tax treaties. One of the provisions of the M.L.I. targets treaty shopping by the adoption of, among other things, a principal purpose test ("P.P.T."). In simple terms, the P.P.T. disallows a treaty benefit when a principal purpose of a transaction is to obtain that benefit. Transactions in accordance with the object and purpose of the provisions of a treaty are not affected by the P.P.T. Many North American tax advisers know that the P.P.T. is based on a provision of Canadian law known as the General Anti-Avoidance Rule or G.A.A.R. A recent decision of the Tax Court of Canada addresses the application of G.A.A.R. to a cross-border tax plan set up by a U.S. financial institution designed specifically to obtain enhanced Canadian tax benefits by rechanneling a U.S. investment in Canada into a U.S. investment into Luxembourg that was then invested into Canada. The Canada Revenue Agency ("C.R.A.") attacked the Luxembourg company's entitlement to treaty benefits relying heavily on G.A.A.R. Kristy J. Balkwill and Benjamin Mann of Miller Thomson L.L.P., Toronto, explain the decision and its potential impact on the P.P.T. The case has been appealed by C.R.A.

September 20, 2017

India: Legal and Practical Strategies for Managing Tax Disputes

September 20, 2017/ Ruchelman P.L.L.C.

Most readers of this journal are front-end tax planners, proposing plans to be implemented by clients. Regrettably, not all plans escape examination by the tax inspector, and in India, that number is on the rise. Sanjay Sanghvi of Attorneys Khaitan & Co., Mumbai explains how to prepare for a tax examination in India and provides practical insights into the examination, appeals, and judicial review processes.

July 15, 2015

Can B.E.P.S. Survive Without U.S. Support?

July 15, 2015/ Web Admin

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On May 28, 2015, the O.E.C.D. announced the countries that will participate in a meeting to begin substantive work on drafting a multilateral instrument under B.E.P.S. Action 15. Currently, more than 83 countries have expressed interest in joining the discussion, which will take place on November 5 and 6, 2015. The United States was noticeably absent from the list. However, the O.E.C.D. hopes that support will continue to grow in the intervening months and that the meeting may ultimately include as many as 100 countries.

The U.S. Treasury chose not to participate in negotiating a multilateral instrument under B.E.P.S. Action 15. After a careful review of the agenda for the discussion on the multilateral instrument, the U.S. Teasury felt that participation did not seem like a good use of its scarce resources. This decision was prompted by the question, “What is there for U.S. to gain by participating in the discussions?”

October 15, 2014

Action Item 15: Developing a Multilateral Instrument to Modify Bilateral Tax Treaties

October 15, 2014/ Web Admin

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AN EXERCISE IN “POINT/COUNTERPOINT”

Implementation of many of the B.E.P.S. Action Items would require amending or otherwise modifying international tax treaties. According to the O.E.C.D., the sheer number of bilateral tax treaties makes updating the current treaty network highly burdensome. Therefore, B.E.P.S. Action Item 15 recommends the development of a multilateral instrument (“M.L.I.”) to enable countries to easily implement measures developed through the B.E.P.S. initiative and to amend existing treaties. Without a mechanism for swift implementation of the Action Items, changes to model tax conventions merely widen the gap between the content of the models and the content of actual tax treaties.

Discussion of Action Item 15 has centered on the following issues: