Multilateral Instrument (MLI)

Overview of the MLI

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, also known as the Multilateral Instrument (MLI)External Link, is a multilateral treaty. It enables jurisdictions to swiftly modify the operation of their tax treaties to implement measures designed to:

better address multinational tax avoidance
more effectively resolve tax disputes.

These measures were developed as part of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project.

Australia signed the MLI on 7 June 2017. The MLI was given the force of law in Australia by the Treasury Laws Amendment (OECD Multilateral Instrument) Act 2018, which received Royal Assent on 24 August 2018.

Australia deposited its instrument of ratification with the OECD Depositary on 26 September 2018.

The MLI entered into force for Australia on 1 January 2019. The extent to which the MLI will modify the operation of Australia’s tax treaties will depend on the adoption positions taken by each jurisdiction at ratification, acceptance or approval of the MLI.

Australia’s notification of its adoption positions at ratification (PDF, 1.4MB)This link will download a file is available on the OECD website.

When the MLI takes effect in Australia

The date of entry into effect for Australia for each of Australia’s tax treaties modified by the MLI depends on the actions of the treaty partner jurisdiction, specifically, when the:

MLI has been ratified, accepted or approved for the treaty partner's domestic purposes
relevant notifications have been lodged with the OECD.

Subject to these processes, the earliest the MLI takes effect in Australia is as follows:

for withholding taxes, on income derived on or after 1 January 2019
for all other taxes, for income years starting on or after 1 July 2019
for dispute resolution, generally on or after 1 January 2019.

How the MLI works

Jurisdictions that sign the MLI are required to identify which of their tax treaties they want the MLI to apply to and modify. The tax treaties which are covered by the MLI are called 'Covered Tax Agreements' (CTAs).

Both treaty partners need to identify their tax treaty as a CTA in order for that treaty's operation to be modified by the MLI. In the event that only one jurisdiction (or neither jurisdiction) identifies a tax treaty as a CTA, the provisions of that treaty will remain un-modified.

The MLI incorporates flexibility that allows jurisdictions to tailor their adoption to fit their particular national circumstances and accommodate unique aspects of their treaty network.

Each jurisdiction is required to notify the OECD Secretariat of its set of provisional choices (referred to as that jurisdiction's 'MLI position') at the time of signature of the MLI, and confirm them at the time of ratification. Jurisdictions' MLI positions are available on the OECD website (PDF, 299KB)This link will download a file.

While some MLI articles are mandatory (minimum standards), most are optional. Jurisdictions can choose to adopt the minimum standards only, or they can choose to adopt some, or all, of the optional articles. If there is a bilateral match, the MLI will modify, but not directly amend, nominated tax treaty clauses. Other unrelated parts of the treaties will remain unchanged.

Tax treaties and the impact of the MLI

Based on other jurisdictions’ known adoption positions, the MLI is expected to modify the operation of many of Australia’s tax treaties (to varying degrees) as indicated in the table below.

The number of treaties modified by the MLI could change if more of Australia’s tax treaty partners sign and ratify the MLI and nominate their treaty with Australia.

The extent to which the MLI will modify these treaties will depend on the adoption positions taken by each jurisdiction at ratification, acceptance or approval of the MLI.

We are preparing a synthesised text for Australia's tax treaties which are modified by the MLI. When we have published a synthesised text it can be accessed from the table below.

Treaties not modified by the MLI

Based on current MLI positions or jurisdictions that have not signed the MLI, tax treaties not modified by the MLI include those with:

Austria
Germany
Iceland
Israel
Kiribati
Philippines
Sri Lanka
Sweden
Switzerland
Taiwan
United States.

Treaties modified by the MLI

The table below lists the treaties the operations of which will be modified by the MLI. Where the treaty partner name has a link, it takes you to a synthesised text (on our Legal Database) which helps users of the MLI understand how the MLI modifies the operation of the particular tax treaty. Find out more about the synthesised texts.

Where the date of effect of the MLI provisions are not yet listed, this indicates that the treaty partner has yet to action its ratification, acceptance or approval of the MLI and notify the OECD.

Date of effect of MLI on Australia's Covered Tax Agreements for withholding taxes and for other taxes
Treaty partner	Entry into effect for withholding tax on income derived on or after	Entry into effect for other taxes for income years starting on or after
Argentina	01/01/2026	01/07/2026
Belgium	01/01/2020	01/04/2020
Canada	01/01/2020	01/06/2020
Chile	01/01/2022	01/09/2021
China	01/01/2023	01/03/2023
Czech Republic	01/01/2021	01/03/2021
Denmark	01/01/2020	01/07/2020
Fiji	–	–
Finland	01/01/2020	01/12/2019 (Note)
France	01/01/2019	01/07/2019
Hungary	01/01/2022	01/01/2022
India	01/01/2020	01/04/2020
Indonesia	01/01/2021	26/06/2021
Ireland	01/01/2020	01/11/2019
Italy	–	–
Japan	01/01/2019	01/07/2019
Korea	01/01/2021	01/03/2021
Malaysia	01/01/2022	01/12/2021
Malta	01/01/2020	01/10/2019
Mexico	01/01/2024	01/01/2024
The Netherlands	01/01/2020	01/01/2020
New Zealand	01/01/2019	01/07/2019
Norway	01/01/2020	01/05/2020
Papua New Guinea	01/01/2024	01/06/2024
Poland	01/01/2019	01/07/2019
Romania	01/01/2024	05/10/2023
Russia	01/01/2021	30/11/2020
Singapore	01/01/2020	01/10/2019
The Slovak Republic	01/01/2019	01/07/2019
South Africa	01/01/2023	01/07/2023
Spain	01/01/2023	01/01/2023
Thailand	01/01/2023	01/01/2023
Turkey	–	–
United Kingdom	01/01/2019	01/07/2019
Vietnam	01/01/2024	01/03/2024

Note: Subparagraph a) of paragraph 1 of Article = 9 of the MLI has effect with respect to the application of the Agreement between Australia and Finland for taxes levied with respect to taxable periods beginning on or after 1 January 2024.

Synthesised texts

We are preparing synthesised texts for the majority of Australia's tax treaties modified by the MLI. These texts help users understand how the MLI modifies the operation of the particular tax treaty. Links to the country-specific texts are available from the table above.

A synthesised text presents the following in a single document:

the text of the tax treaty which is modified by the MLI, including the text of amending instruments such as protocols
the provisions of the MLI that have an effect on the tax treaty as a result of the interaction of the MLI positions of the jurisdictions
the dates on which the provisions of the MLI take effect for the tax treaty.

The sole purpose of a synthesised text is for facilitating the understanding of the application of the MLI to a particular tax treaty. A synthesised text does not constitute a source of law. The authentic legal texts of the tax treaty and the MLI take precedence and remain the legal texts applicable.

Main features of the MLI and Australia's adoption positions at ratification

The main features of the MLI and Australia’s adoption positions at ratification of the MLI are published on the Treasury websiteExternal Link. The extent to which the MLI will modify the operation of Australia’s tax treaties will depend on the adoption positions taken by other jurisdictions at ratification, acceptance or approval.

Supporting material

To help stakeholders understand the effect of the MLI on Australia’s tax treaties, we are producing supporting materials and guidance.

Article 4 – Dual resident entities (non-individual)

Guidance on competent authority determinations for non-individuals under Article 4(1) of the MLI is available. For information regarding the administrative approach for competent authority determinations for Australia or New Zealand companies, see MLI Article 4(1) Australia and New Zealand administrative approach.

Article 7 – Prevention of treaty abuse (principal purposes test)

We have released Practice Statement Law Administration PS LA 2020/2 Administering general anti-abuse rules, such as a principal or main purposes test, included in any of Australia's tax treaties.

PS LA 2020/2 outlines instructions to ATO staff on the administrative process of applying the general anti-abuse rules in Australia's tax treaties to ensure consistent administration.

PS LA 2020/2 covers the administration of the following general anti-abuse rules in Australia's tax treaties:

the principal purposes test (PPT) under Article 7 of the MLI
a PPT in an Australian tax treaty that is not impacted by the MLI
a main purposes test in an Australian tax treaty that is yet to be or will not be modified by the MLI.

Article 8 – Dividend transfer transactions

Find out more information about the Straddle holding period.

Articles 18–26 – Arbitration (optional article)

The MLI will modify many of Australia's tax treaties to provide for mandatory binding arbitration. The date of effect and the availability of mandatory binding arbitration will vary between each tax treaty. Find out more about the eligibility, process, availability and timing for requesting arbitration via a mutual agreement procedure.

MLI resources

More information on the MLI can be found in the following resources: