BEPS: Green flag for signing multilateral convention to curb tax shopping
NEW DELHI, MAY 17:
The Union Cabinet on Wednesday approved the signing of multilateral convention to implement tax treaty related measures to prevent Base Erosion and Profit Shifting (BEPS).
The proposed multilateral instrument is an outcome of the OECD/G20 BEPS project to tackle base erosion and profit shifting through tax planning strategies that exploit gaps and mismatches in tax rules.
The Cabinet nod on Wednesday marks the formal go-ahead for India to sign the multilateral instrument in Paris on June 7.
The convention is being conceived as a multilateral instrument in view of the final BEPS package —which has identified 15 actions — requiring changes to more than 3,000 bilateral tax treaties which will be burdensome and time consuming.
This convention would swiftly modify all covered bilateral tax treaties (covered tax agreements) to implement BEPS measures, an official release said.
India proposes to make a provisional list of Covered Tax Agreements and a provisional list of reservations at the time of signature in June 2017.
Final lists for both will be submitted by India at the time of submission of instrument of ratification.
Experts’ take
Girish Vanvari, Partner & Head, Tax at KPMG in India, said that it would be interesting to see what measures India would adopt through the multilateral instrument as one has already seen amendment in the recent times to the bilateral tax treaties India has with Mauritius, Cyprus and Singapore in the context of treaty abuse, etc.
Amit Maheshwari, Partner, Ashok Maheshwary & Associates LLP, said that the proposed signing of multilateral instrument (MLI) will have a limited impact from India’s perspective as the country had already amended the much abused treaties of Mauritius and Singapore.
“MLI will cover rest of the lesser abused tax treaties and thereby considerably reduce tax leakage on account of BEPS,” Maheshwari told BusinessLine.