On June 23, the Government of Seychelles approved the ratification of the BEPS MLI convention. After completing the internal ratification process, Seychelles must deposit its ratified instrument with the Office of the Organization for Economic Co-operation and Development (OECD) in order to bring into force the BEPS MLI for its treaties (tax treaties). The Convention will enter into force on the 1st day of the month following the 3-month period after ratification.
The MLI Convention (the full name is the Multilateral Convention on the Implementation of Measures Relating to Tax Treaties to Combat the Erosion of the Tax Base and the Removal of Profits from Taxation) is a multilateral treaty developed by the Organization for Economic Cooperation and Development (hereinafter - OECD) in the framework of combating erosion of the tax base and removal of profits from taxation (hereinafter - the BEPS Plan).
As part of the BEPS Plan, the MLI aims to:
- solve the issues of applying certain hybrid schemes to reduce the tax burden
- prevent abuse of agreement provisions
- solve the problems of artificial avoidance of permanent establishment status and improve the dispute resolution procedure
In fact, the main postulate of the Convention is the prohibition on the use of privileges provided for by the relevant agreement on the avoidance of double taxation between the member countries of the Convention in the event that the purpose of the structure or a specific transaction is, first of all, the application of such privileges. This is called the Principal Purpose Test rule. This rule stipulates that the structure being created should be created for a business, commercial purpose, and not for the purpose of applying the benefits of agreements. In addition to the rule of the main purpose, the parties to the Convention could choose the so-called Simplified Limitations on
Benefits, S-LOB). This provision stipulates that only a limited number of persons (individuals, public companies, government institutions and active companies) can apply the benefits provided by the Tax Tax Treaty.
Since the entry into force of the Convention, it is necessary to be very careful about the use of treaties for the avoidance of double taxation and be sure to take into account the provisions of the MLI.
