Employers and employees are to have the option of arbitration to resolve double-taxation disputes with at least 60 countries under a multilateral tax treaty of the Organisation for Economic Co-operation and Development (OECD) that is to be signed June 7 in Paris by representatives of member countries, an OECD news release said June 6.
Known as the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), the so-called super-treaty is the first multilateral agreement of its kind to amend multiple tax treaties with changes intended to reduce double taxation and also nontaxation through tax evasion or avoidance by multinational enterprises.
Mandatory and binding dispute resolution mechanisms are to be extended to employers and individuals in signatory countries under the treaty. Employers may present double-taxation disputes to applicable authorities through a mutual agreement procedure within three years from the first notification of the action resulting in taxation irrespective of the remedies provided by domestic law.
The OECD’s multilateral BEPS treaty is to enter into force on the first day of the third full calendar month after the date when the fifth OECD member state that ratifies the treaty deposits its instrument of the treaty’s ratification.
Provisions of the OECD’s multilateral BEPS treaty that affect other tax treaties are to enter into effect after the parties to those other treaties have ratified the multilateral BEPS treaty. Countries may specify the existing tax treaties to which the convention applies.
Sixty-seven countries and the special administrative region of Hong Kong are planning to sign the multilateral convention, OECD tax chief Pascal Saint-Amans said at an OECD tax conference June 6. Expected signatories include most OECD and G-20 countries, with the exception of the United States. China is expected to provide a signature on behalf of Hong Kong and nine additional countries plan to sign letters of intent June 7.
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The text of the treaty can be accessed at: src.bna.com/pA1.
The text of the explanatory statement accompanying the treaty can be accessed at: src.bna.com/pA2.
A list of countries expected to sign the treaty can be accessed at: http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf.
The OECD release regarding the treaty can be accessed at: http://www.oecd.org/newsroom/ground-breaking-multilateral-beps-convention-to-be-signed-at-oecd.htm.
More information on payroll issues in the countries covered by the convention can be found in the International Payroll Decision Support country primers.
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