MLI Convention

Contents

1. General

2. How the MLI Works

3. Outline of Saudi Arabia's Positions in the Application of the MLI

Article 6 – Purpose of a Covered Tax Agreement
Article 7 – Prevention of Treaty Abuse
Article 12 – Artificial Avoidance of Permanent Establishment Status Through Commissionaire Arrangements and Similar Strategies
Article 13 – Artificial Avoidance of Permanent Establishment Status Through the Specific Activity Exemptions
Article 14 – Splitting-up of Contracts
Article 15 – Definition of a Person Closely Related to an Enterprise
Article 16 – Mutual Agreement Procedure
Article 17 – Corresponding Adjustments

4. The Entry Into Force and the Effective Dates of MLI Modifications

5. Development of Synthesized Texts

1. General

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ('Multilateral Instrument' or 'MLI') entered into force in the Kingdom on 1 May 2020.

Saudi Arabia signed the MLI on 18 September 2018 and ratified it on 6 November 2019 by the Royal Decree No. M/29, dated 9/3/1441H. It presented the instrument of ratification of the MLI to the OECD Secretariat on 23d January 2020. On the same date, it presented its final MLI positions, including its reservations and notifications of optional provisions.

2. How the MLI Works

The MLI is a multilateral treaty that enables jurisdictions to swiftly modify the operation of their tax treaties to implement measures designed to better address multinational tax avoidance and more effectively resolve tax disputes.

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 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.