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Isle of Man ratifies new OECD tax treaty

24 November 2017

The Isle of Man committed to meet the OECD’s Base Erosion and Profit Shifting (BEPS) standards in June 2016 and recently became one of the first countries to ratify the new Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ("Multilateral Instrument" or "MLI").

The Isle of Man became the second jurisdiction to deposit its instrument of ratification for the Multilateral Instrument with the OECD’s Secretary-General, Angel Gurría, on 25 October 2017. This followed its ratification by Tynwald on 17 October 2017. The Multilateral Instrument means that new measures can be incorporated into thousands of tax treaties around the world, without the need for countries to undertake multiple bilateral negotiations, and enables 8 of the Isle of Man’s Double Taxation Agreements to be modified to meet the BEPS minimum standard.

The Isle of Man’s Treasury Minster joined nearly 70 other countries in June this year signing the Multilateral Instrument. The Isle of Man’s Assessor of Income Tax was a member of the Ad Hoc Group that developed this ground breaking new international tax convention which was the first for the Isle of Man to sign in its own right.

The Multilateral Instrument forms part of the OECD’s BEPS project (BEPS Action 15). BEPS refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits between jurisdictions in order to minimise tax liability.

Since it committed to meet the OECD’s BEPS standards in June 2016 the Isle of Man has also taken the following important steps to ensure its compliance with those standards:

• In October 2016 the Isle of Man’s Chief Minister signed the Multilateral Competent Authority Agreement (MCCA) to assist with the sharing of relevant information in relation to Country by Country Reporting (CbCR) (BEPS Action 13).

• Regulations to implement CbCR in the Isle of Man were passed by Tynwald in March this year and reporting for those multinational groups with a high enough turnover will start from January next year.

• The Income Tax Division is making sure that its processes and procedures meet the BEPS standards on tax rulings (BEPS Action 5) and dispute resolution (mutual agreement procedure BEPS Action 14)

More information on all the above can be found on the Income Tax Division’s website at https://www.gov.im/categories/tax-vat-and-your-money/income-tax-and-national-insurance/international-agreements/Base-Erosion-and-Profit-Shifting

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