The Malaysian Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) is an international treaty that modifies and updates existing double taxation agreements (DTAs) between Malaysia and various other countries.
The primary purpose of the MLI is to ensure that these DTAs are in line with international standards for preventing tax base erosion and profit shifting by multinational enterprises.
The MLI is part of a broader global effort to address tax avoidance practices and to promote greater transparency and fairness in international taxation.
It was developed as part of the Base Erosion and Profit Shifting (BEPS) project initiated by the Organisation for Economic Co-operation and Development (OECD).
Key aspects and objectives of the MLI include:
- Prevention of Treaty Abuse: The MLI includes provisions to prevent the misuse of tax treaties for the purpose of avoiding taxes. This includes measures to counteract treaty shopping, where businesses exploit the differences in tax treaties between countries to reduce their tax liabilities.
- Hybrid Mismatches: The MLI addresses issues related to hybrid mismatches that can lead to double non-taxation or double deduction. It seeks to align the treatment of these mismatches with international standards.
- Improving Dispute Resolution: The MLI aims to enhance the effectiveness of dispute resolution mechanisms, making it easier for taxpayers to resolve disputes related to the interpretation or application of tax treaties.
- Transparency and Exchange of Information: It promotes greater transparency and facilitates the exchange of information between tax authorities to prevent tax evasion and enhance compliance with tax laws.
- Implementation and Modification: The MLI provides a framework for implementing these measures in existing DTAs while allowing countries to tailor the specific provisions to their preferences.
Overall, the MLI is part of Malaysia’s commitment to international efforts to combat tax avoidance and improve the integrity of its tax treaty network. It ensures that Malaysia’s DTAs are consistent with modern international tax standards and helps to protect its tax base from erosion.
The Inland Revenue Board of Malaysia (HASiL) has published the Synthesized Texts (ST) of Malaysia’s Double Taxation Agreements (DTAs) with Albania, Bosnia and Herzegovina, Chile, China, Croatia, Denmark, Egypt, Finland, France, and Hong Kong, including any adjustments introduced by the Multilateral Convention to Implement Tax Treaty Related Measures for the Prevention of Base Erosion and Profit Shifting (MLI) to become effective on their respective dates.
It outlines the taxation rules for various types of income, discusses the elimination of double taxation, and includes provisions related to non-discrimination, mutual agreement procedures, exchange of information, and termination of the agreement.
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