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We live in a large society.The world has since the Peloponnesian war travelled miles ahead. The principles of fair play and justice are used in international relations. If we concede that fair play is the significant element in international relations then also the national self-interest exerts a powerful force. The issue is whether it is possible for countries in the globalised world to enter into a collaborative rather than competitive coexistence.
The OECD has come up with many action plans. One of them is BEPS.
BEPS was launched in financial crisis in 2008. It had the goal of reframing international tax framework and to see that value is create out of the economic activities which are carried out.India signed the treaty along with other developing countries on June 7 , 2017.
It forecasted a new era in cross border businesses with respect to taxation. It includes UK , Canada Germany , India , Italy and Russia.Also many important partners for example India and Germany have not notified the signing of MLI in their India-Germany Double Tax Avoidance Agreement.
The impact will change the manner in which the upcoming investments in India are structured especially requiring of the mandatory amendment of bilateral tax treaties for certain minimum standards to be applied in case of bilateral treaties.This will lead to problems for businesses which are based on subjective application. It will lead to rise in the levels of uncertainties.
The new rules of Indian General Anti Avoidance Rules will reduce the comfort of during business because of unclarity on applicability of provisions. Otherwise clear on many aspects , due to no involvement of tax payer in the discussion has led to structural lacunae.
The paper tries to analyse the provisions of the MLI, the provisional notifications issued by India , the choices of key treaty jurisdictions from an Indian inbound and outbound perspective to assess the impact that the MLI will have on business operations in India.
Mechanism of MLI
The provisions of MLI will apply to countries which have :
The MLI will apply only to those countries :
Reservations With Respect to Non-Mandatory or Optional Provisions
A party to the MLI has the right to reserve for provisions of the MLI :
to its covered tax treaties in their entirety; or
a subset of its covered tax treaties.
The Optional provisions
The MLI in many cases allows a Party to choose among alternative provisions which are intended to address the same issue.. For Example, Article 13 of the MLI deals with “Artificial Avoidance of Permanent Establishment Status through the Specific Activity Exemptions” provides that Parties has to opt for either Option A or Option B to modify their CTAs. One of the options will apply to a CTA only when both Treaty Partners have elected that option.
The MLI has certain compatibility clauses .These define the relationship between the MLI and the provisions of a CTA. These are aimed to address overlap or conflicts between the provisions of the MLI and the provisions of a CTA.
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