Breakfast briefing: Multilateral convention on addressing base erosion and profit shifting – Understanding India’s position

September 2019

Date : 04th October 2019 (Friday)
Time : 7:30 AM – 10:00 AM
Venue : Desire Hall, Le Meridien, New Delhi
The Double Taxation Avoidance Agreements (DTAAs) signed between nations seek to provide relief from the income being taxed more than once in the hands of the non-resident tax payer. The DTAAs are the result of bilateral negotiation between the respective countries and would generally be unique to the two, though they may follow the OECD or UN Model Conventions. Thus, entities could take advantage of the difference in wording, interpretation of the DTAAs and arrange their affairs to minimize the tax implications.
In order to address the issue of aggressive tax planning leading to base erosion and shifting of profits, nations came together to agree on a model convention. The Model Multilateral Convention on Measures to check Base Erosion and Profit Shifting or MLI provides a mechanism to introduce changes in the language of the Article(s) of the DTAA without having series of bilateral negotiations and also to bring in uniformity in the Articles. Some of the important Articles in the MLI pertain to the Limitation of Benefits under the treaty to persons who satisfy the test of substance or Principal Purpose, changes to threshold for creation of PE, artificial splitting of contracts, conditions under which an Agency PE may be created, exemption for auxiliary activities and so on.

India deposited the instrument of ratification on 25th June  2019 and the changes will start coming into from financial year 2020-2021 onwards for some of the DTAAs. The MLI will be applied along with existing DTAAs and hence, it is important to understand the specific changes which have been incorporated by each treaty partner. Some countries like China for instance have opted not to bring changes in the DTAA with India through MLI, and yet others have opted to change only some clauses. Moreover, the existing jurisprudence in respect of the interpretation of various terms can continue to apply.

In order to discuss the finer details of the MLI and the impact on various treaties, Lakshmikumaran & Sridharan  is organizing a breakfast discussion on ‘’Multilateral convention on addressing base erosion and profit shifting – Understanding India’s position.

Mr V. Lakshmikumaran, Managing Partner, L&S will lead the discussions and will be joined by Mr S. Vasudevan, Partner, Direct Tax