BEPS: Signing of the Multilateral Instrument – Adaption of the existing double tax treaties

On 7.6.2017 68 jurisdictions (including all EU/EEA-member states except for Estonia) have gathered in Paris in order to sign the MLI („Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting“ – BEPS). The MLI was drafted by an ad hoc group of 99 countries, Austria was among them, and matches action 15 of the OECD/G20’s BEPS action plan. The action plan aims at ensuring that profits are taxed at the place, where the substantive economic activities generated the profits are carried out and where value is created.


The MLI consists of 39 articles and especially touches on BEPS actions 2 (Hybrid Mismatch), 6 (Prevention of Treaty Abuse), 7 (Preventing the Artificial Avoidance of Permanent Establishment Status) as well as 14 (Dispute Resolution Mechanisms). Due to the direct implications on the existing double tax treaties (DTT) it facilitates a swift, internationally aligned and consistent implementation of these measures without lengthy bilateral negotiations of the individual DTT. On the one hand the MLI includes provisions, which represent the BEPS minimum standards, and on the other it contains optional and alternative provisions, which the participating jurisdictions may voluntarily include as adaptions to their existing DTT. Modifying the individual bilateral DTT, however, is only possible if the reservations and notifications of one contracting country regarding a specific MLI-regulation coincide with those of the respective other contracting jurisdiction.


As of 1 January 2017 Austria has concluded more than 90 DTT; a modification by the MLI is currently only intended for 38 DTT (by listing them in the notification to the OECD). This is consistent with the notification of the concerned contracting jurisdictions. The number of the Austrian covered DTT may change at a later point of time. A provision entering into effect requires that both countries have announced the same (optional) regulations of the MLI.

Minimum standard.

From an Austrian perspective the BEPS minimum standard was implemented as follows: The preambles of the covered DTT have to state that the DTT must not create the possibility of non-taxation (article 6). In regards to article 7 (Prevention of Treaty Abuse) Austria has chosen the Principal Purpose Test (PPT). Under the PPT treaty benefits shall not be granted for transactions, for which the principal purpose of one of the principal purposes was to obtain those benefits.

Further provisions.

Further applicable regulations, which have been accepted by Austria, are subject to the contracting jurisdiction’s approval and go beyond the minimum standard, are the following: Article 5 (taxation right of residence state in case of certain qualification conflicts in order to avoid double non taxation), 10 (Anti-abuse Rule for Permanent Establishments Situated in Third Jurisdiction), 13 (Triggering of a permanent establishment also for activities in the meaning of Art 5 Para 4 OECD-Model Convention if these activities are not of a preparatory or auxiliary character), Art 17 (Corresponding Adjustment regarding transfer pricing) and 18 following (Mandatory Binding Arbitration if in the course of a mutual agreement procedure no agreement has been reached after 3 years). Austria abstained from implementing any other MLI provisions (eg article 3 and 4 regarding Hybrid Mismatches, article 14 regarding Splitting up of Contracts in order to avoid permanent establishments).

Entry into force.

In Austria the MLI is regarded as a treaty and needs to be implemented into national law. The MLI will come into force for the first 5 jurisdictions, which submitted the ratified MLI to the OECD, on the first day of the fourth month after the submission of the last and fifth ratification certificate. For all other signing countries it will enter into force on the first day of the fourth month following the respective submission (eg submission 1.3.2018, coming into force 1.7.2018). As far as the MLI entered into force, the entry into effect depends on the type of tax: Regarding withholding taxes the Austrian explanations assume that MLI may enter into effect for taxable events as of 1.1.2019, for other taxes for tax periods as of 1.1.2020.


It is planned to make consolidated versions of the covered DTT available. Until then, not only the respective DTT but also the reservations and notifications of both contracting jurisdictions (published on the OECD homepage regarding the MLI will have to be checked in detail in case of international tax matters.

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Andrea Winkler

Andrea Winkler

Assistant| Deloitte Tax
Telefon: +43 1 537 00 5616

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