On 7 June 2017, the Commissioner of China State Administration of Taxation (SAT) together with representatives from 67 jurisdictions attended the OECD signing ceremony on the Multilateral Convention (the Convention or the MLI). The MLI, which aims to swiftly modify bilateral tax treaties to implement the tax treaty-related BEPS recommendations, was released at the end of 2016 after negotiations involving over 100 countries and jurisdictions. The signing ceremony earmarked an important milestone in the tax treaty history, unfolding a new landscape of tax treaties internationally. It should be noted that when signing the MLI, China also signed on behalf of Hong Kong. For details of Hong Kong’s position, please refer to our Hong Kong News Flash 2017 Issue 06.
After the signing ceremony, the ‘MLI position’ for each country and jurisdiction are published on the OECD website. It should also be noted that these positions are only provisional and may still be subject to change before ratification. China has basically opted in to the provisions of the MLI which represent the minimum standards (e.g. the principal purpose test (PPT) for preventing treaty abuse and the requirement for the full implementation of Mutual Agreement Procedures (MAP)) and opting out of some of the provisions that are not mandatory (e.g. artificial avoidance of permanent establishment (PE)).
Both Chinese and foreign companies having cross-border transactions are urged to assess the impact on their existing or potential business structures against the measures in the MLI, as well as the relevant countries’ or jurisdictions’ provisional positions.
Lead Partner, China Outbound Investment Service; China North Tax Leader, PwC Hong Kong
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