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Existing Multilateral Instruments (MLI) to Prevent Tax Avoidance

Updated: Sep 4, 2022

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting was signed under the guidance of the Organisation for Economic Cooperation and Development (OECD) in Paris on 7 June 2017.

67 other jurisdictions also signed the Convention, including 35 of Australia’s bilateral tax treaty partners to ensure that multinationals pay tax in the jurisdiction where economic value is created or added. The Convention is intended to complement the Government’s Multinational Anti-avoidance Law (MAAL), the Diverted Profits Tax (DPT) and the Tax Avoidance Taskforce.

How Do MLIs Work?

The Convention modifies most of Australia’s bilateral tax treaties to implement integrity rules that will apply to tax avoidance and tax treaty-based dispute resolution mechanisms. In the absence of the Convention, Australia would have to introduce the new rules treaty by treaty which would be very time consuming.

Based on countries’ known adoption positions, the Convention will modify 30 of Australia’s bilateral tax treaties, those with Argentina, Belgium, Canada, Chile, China, the Czech Republic, Denmark, Fiji, Finland, France, Hungary, India, Indonesia, Ireland, Italy, Japan, Malta, Mexico, the Netherlands, New Zealand, Norway, Poland, Romania, Russia, Singapore, the Slovak Republic, South Africa, Spain, Turkey and the United Kingdom.

The extent to which the Convention will modify these treaties will depend on the final adoption positions taken by each country. Australia notified its adoption positions on a provisional basis, to be confirmed upon ratification of the Convention.

The Convention enter into force after signatories have completed their domestic requirements and deposited their instruments of ratification with the OECD. Subsequently legislation is introduced into the Australian Parliament to give the Convention the force of law in Australia.

A copy of the text of the Convention and information on jurisdictions’ adoption of it is available on the OECD website. For information on the main features of the Convention and Australia’s provisional adoption provisions please contact us.

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