Canada has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). More than 68 countries, including Canada, signed the Convention on 7 June 2017 at Paris.
The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide.
The Convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the Final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6.
The effective date for MLI depends on the timing of domestic ratification process. However, a Canadian Department of Finance official has taken risks, based on reasonable assumptions regarding the timing of the domestic ratification procedures, that the MLI could enter into force as early as 1st of January 2019 (for withholding taxes) and (for all other taxes) for taxable periods starting after 1st of June 2019 with respect to Canada’s Covered Tax Agreements.