Perhaps not surprisingly, the USA has indicated it will not be signing the MLI. But, while it may be tempting to gloss over this recent development in favor of news closer to home, Taxand USA explains why it is important to understand that the MLI could have significant ramifications for the tax provisions of USA based multinationals by virtue of its potential impact on over a thousand current tax treaties across the globe.
USA based multinationals must consider domestic tax laws and tax treaties not only of the U.S. but of many other jurisdictions when planning and accounting for the tax consequences of foreign operations. Many such plans and strategies aim for tax-neutral or tax-beneficial treatment. As the BEPS actions related to tax treaties near fruition, existing tax planning strategies producing the effect of double non-taxation may be at risk. Now is the time to take stock of any arrangements that may fall within the changes implemented through the MLI and determine whether the arrangements are material enough to warrant preemptive action (e.g., quantifying the potential impact on the company’s financial statements and possibly unwinding and/or implementing alternative arrangements).
Discover more: What you need to know about the Multilateral instrument
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The first step in staying ahead of the game when it comes to the MLI should be to identify any aspects of your foreign profile that may be affected by any of the BEPS treaty-related actions, which again include measures against hybrid mismatch arrangements (Action 2), measures against treaty abuse (Action 6), measures to strengthen the definition of permanent establishments (Action 7) and measures to make mutual agreement procedures (MAPs) more effective (Action 14).
