Entry into Force - Article 34

  • Legal Texts 

Entry into Effect - Article 35

  • Legal Texts

Application of Article 35 - entry into effect to CTAs

  • Japan-Singapore CTA
  • Japan-United Kingdom CTA
  • Malta-Singapore CTA
  • Malta-United Kingdom CTA

 


 

 

 

Date of Entry into Force - Article 34

 

Multilateral Convention to Implement Tax Treaty Related Measurements to Prevent Base Erosion and Profit Shifting (the Convention) took effect on 1st July 2018.

 

Article 34(1) of the Convention provides that, the Convention entered into force on the first day of the month following the expiration of a period of three calendar months beginning on the date of deposit of the fifth instrument of ratification by Slovenia on 22 March 2018.

In chronological order, 5 jurisdictions, the Republic of Austria (22 September 2017), the Isle of Man (19 October 2017), Jersey (15 December 2017), Poland (23 January 2018) and Slovenia (22 March 2018), deposited their instruments with the OECD Depositary. Consequently the Convention came into force on 1st July 2018. That is, the 1st day of the month following the expiration of a period of 3 calendar months beginning on 22 March 2018, the date on which Slovenia deposited the instrument of ratification to the OECD Depositary.

 

Article 34(2) of the Convention provides that for each Signatory ratifying, accepting, or approving this Convention after the deposit of the fifth instrument of ratification, acceptance or approval, the Convention shall enter into force on the first day of the month following the expiration of a period of three calendar months beginning on the date of the deposit by such Signatory of its instrument of ratification, acceptance or approval.

 

In June 2018, 4 more signatories, New Zealand, Serbia, Sweden, and the UK, deposited the instrument of ratification to the OECD depositary on 27th June, 5th June, 22nd June and 29th June respectively, which all occured before the last day of June 2018. 

 

The Convention should enter into force for these 4 jurisdictions on 1st Oct 2018, the first day of the month following the expiration of a period of 3 calendar months on the said date. 

 
 
 
 
Date of Entry into Effect
 
 
Article 35(1) provides that the Multilateral Convention (the MLI) shall take effect in each contracting jurisdiction with respect to the covered tax agreement:

(a) for taxes withheld at source on amounts paid or credited to non-residents (withholding tax), where the events giving rise to such taxes occurs on or after the first day of the next calendar year that begins on or after the latest of the dates on which the MLI comes into force for each of the contracting jurisdictions to the covered tax agreement (the CTA); and

(b) with respect to all other taxes leived by that contracting jurisdiction, for taxes levied with respect to taxable periods beginning on or after an expiration of a period of 6 calendar months from the latest of the dates on which the MLI comes into force for each of the contracting jurisdictions to the CTA.

 
Notes:
 
1) Most of the contracting jurisdiciton choose the above entry-into-effect date under Article 35(1), meaning that the MLI shall take effect symmetrically on the contracting jurisdictions to the CTA.
 
2) Where a contracting jurisdiction chooses to apply Article 35(1)(a) with respect to the provision for withholding taxes, the MLI shall take effect with respect to withholding tax on the same date as the entry-into-force date.  Japan is one of the contracting jurisdictions that adopts this approach for the entry-into-effect date with respect to the provision for withholding taxes. See the illustrated examples below.
 
3) A contracting jurisdiction can apply the alternative provision for the entry-into-effect date with respect to all other taxes under Article 35(3) of the MLI. That is, if that contracting jurisdiction opts in for Article 35(3), it will replace the provisions under Article 35(1)(b) with Article 35(3). Malta is one of the contracting jurisdictions that opts in for Article 35(3). See the illustrated examples below.