Article 6 of MLI introduces changes in the Preamble of the Covered Tax Agreements. It is a minimum standard as recommended under BEPS Action 6 report.
We have discussed in detail the preamble stated under Article 6 of MLI in our previous post. Click here to read it.
MLI preamble will be in place of or in the absence of the existing preamble language of a CTA, which expresses an intent to eliminate double taxation. However, a Party is permitted to make a reservation for those CTAs which already satisfy the minimum standard and contain the requisite preamble language. In such case reservation by one of the Treaty Partners to a CTA, the preamble of that CTA will remain unchanged.
Paragraph 5 of Article 6 requires Signatories to notify the Depository which of its CTAs (not covered by the reservation) contain a preamble language referring to intent to eliminate double taxation. Both the Treaty Partners have made such notification, the preamble of such CTA stands replaced by the MLI Preamble. If one or both of the Treaty Partners remain silent on such notification and none of them have made a reservation, then the existing preamble shall include the MLI Preamble.
For the applicability of Article 6(1) to the existing CTA, refer to the decision tree below.
For the applicability of Article 6(3) to the existing CTA, refer to the decision tree below.