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Date of Entry into Force under Multilateral Instruments

 

Article 34 of Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting also known as MLI

 

For understanding the date of implementation and from when a provision of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent  Base Erosion and Profit Shifting (Multilateral Instruments or ‘MLI’) apply towards an existing bilateral treaty, it is critical to understand the two key concepts: Date of Entry into Force and Date of Entry into Effect

What is the Date of Entry into Force?

Article 34 of the MLI  defines the Date of Entry into Force. The Article provides the method for determination of the Date of Entry into Force for two categories.

Paragraph 1 of Article 34 of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent  Base Erosion and Profit Shifting

For the first five MLI deposited, the Convention/MLI 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 deposit of the fifth instrument. As of that date, the five Signatories depositing their instruments of ratification, acceptance, or approval to the Convention will become Parties and bound by the Convention.

What if the fifth instrument of ratification, acceptance, or approval is deposited on the first day of a month?

The Explanatory Statement to Multilateral Convention to Implement Tax Treaty Related Measures to Prevent  Base Erosion and Profit Shifting states in such a situation, “the first day of the month following the expiration of a period of three calendar months beginning on the date of deposit” will be four months after the deposit of the instrument or instruments of ratification, acceptance or approval.

Illustration: State A being the fifth country to deposit its instrument of ratification, deposits the instrument on 1st April 2018, the Convention will enter into force on 1st August 2018.

The first five countries to deposit the MLI of ratification, acceptance, or approval are, i.e., Austria, the Isle of Man, Jersey, Poland, and Slovenia.

CountryDeposit of Instrument of Ratification, Acceptance or Approval
Austria22/09/2017
The Isle of Man25/10/2017
Jersey15/12/2017
Poland23/01/2018
Slovenia22/03/2018

As Slovenia was the fifth country to deposit the MLI, the date of entry into force for all the above mentioned five countries is 1st July 2018.

Paragraph 2 of Article 34 of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent  Base Erosion and Profit Shifting

For all the other signatories, the date of entry into force will be 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.

What if the deposit of the instrument of ratification, acceptance, or approval occurs on the first day of a month?

The Explanatory Statement to Multilateral Convention to Implement Tax Treaty Related Measures to Prevent  Base Erosion and Profit Shifting states in such a situation, “the first day of the month following the expiration of a period of three calendar months beginning on the date of deposit” will be four months after the deposit of the instrument or instruments of ratification, acceptance or approval.

CountryDeposit of Instrument of Ratification, Acceptance or ApprovalDate of Entry into Force
Belgium26/06/201901/10/2019
Canada29/08/201901/12/2019
France26/09/201801/01/2019
Ireland29/01/201901/05/2019
Japan26/09/201801/01/2019

Note: The concept of entry into force applies to each country and not to each CTA.

By Taxbeech

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