On the 5th of July 2017 Mauritius signed the “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting”, at the Organisation for Economic Co-operation and Development (OECD) Headquarters in Paris as a commitment to the international movement to fight tax evasion and base erosion.
The Multilateral Convention, also known as the Multilateral Instrument (MLI), will implement a series of tax treaty measures to update the existing network of bilateral tax treaties and reduce opportunities for tax avoidance. The Convention will also strengthen provisions relating to resolving treaty disputes, including mandatory binding arbitration.
The Convention covers 23 of the existing Double Taxation Avoidance Agreements (DTAAs) of Mauritius, including Barbados, Belgium, Republic of Congo, Croatia, Cyprus, France, Germany, Guernsey, Italy, Kuwait, Lesotho, Luxembourg, Madagascar, Malta, Monaco, Oman, Qatar, Seychelles, South Africa, Swaziland, Sweden, United Arab Emirates and United Kingdom.
As an international agreement however, in order for the MLI to be binding, the other contracting state to the DTAA must elect to classify the DTAA as a Covered Tax Agreement. Thus far, 15 countries have signed the MLI and have notified the OECD of their wish for their respective DTAA to be covered by the MLI.
The Mauritius government has pledged to amend the remaining DTAA that are not affected by the Multilateral Convention through bilateral negotiations to ensure the integration of the BEPS minimum standards by the end of 2018.
The remaining 19 treaty-partner countries are Bangladesh, Botswana, China, Egypt, India, Malaysia, Mozambique, Namibia, Nepal, Pakistan, Rwanda, Senegal, Singapore, Sri Lanka, Thailand, Tunisia, Uganda, Zimbabwe and Zambia.
Mauritius has also actively participated in the Ad-Hoc Group set up by the OECD to work on the drafting of the Multilateral Instrument as recommended under Action 15 of the BEPS Report.
Whilst we welcome the enthusiasm to be seen to be compliant, one has to wonder at the keenness to implement BEPS legislation, given that Mauritius is likely to be a recipient of profit shifting and this is likely to impact on their ability to do such business.