Action 6: Prevention of Treaty Abuse
Action 6 of the BEPS Package identifies treaty abuse, and in particular treaty shopping, as one of the most important sources of BEPS concerns.
Given the risk to revenues posed by treaty shopping, jurisdictions have committed to ensure a minimum level of protection against treaty shopping that requires jurisdictions to include in its tax treaties an express statement that their common intention is to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance, including through treaty shopping arrangements.
To meet the BEPS minimum standard any new Double Taxation Agreement (DTA) the Isle of Man negotiates in the future should be consistent with Action 6. A number of the Isle of Man's existing DTAs, known as 'covered agreements' will be modified to become BEPS compliant using a new international treaty, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the "Multilateral Instrument" or "MLI") that was developed in response to BEPS Action 15. The Isle of Man will seek to agree appropriate changes to its existing comprehensive DTAs that cannot be modified by the MLI.
Action 15: Multilateral Instrument (MLI)
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the "Multilateral Instrument" or "MLI") was developed through a negotiation involving more than 100 jurisdictions, including the Isle of Man, and was adopted in November 2016.
The MLI modifies the application of thousands of bilateral tax treaties without the need for jurisdictions to undertake multiple bilateral negotiations and implements agreed minimum standards to counter treaty abuse.
On 7 June 2017 the Isle of Man signed MLI which was ratified by Tynwald in October 2017.
In order to enter into force the MLI requires at least five of the signatory jurisdictions to complete the ratification process. As of October 2017 two jurisdictions, Austria and the Isle of Man, had completed the process therefore further details of the entry into force date, and the Isle of Man's covered agreements will provided here in due course.