Mongolia signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS

On 6 October 2022, Mongolia signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the BEPS Convention), at a signing ceremony held in Paris at the 14th meeting of the Inclusive Framework on BEPS. Mongolia has become the 100th jurisdiction to join the BEPS Convention, which now covers around 1850 bilateral tax treaties.

The BEPS Convention delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to “disappear” or be artificially shifted to low or no tax environments, where companies have little or no economic activity. The BEPS Convention also enhances the dispute resolution mechanism, especially through the addition of an optional provision on mandatory binding arbitration.

Background

On 5 October 2015, the Organisation for Economic Co-operation and Development (OECD) released its final report on developing a multilateral Instrument (MLI) to modify bilateral tax treaties under its BEPS Action Plan (Action 15). This report was released in a package that included final reports on all 15 BEPS Actions.

On 24 November 2016, the OECD released the text of the MLI and explanatory notes. On 7 June 2017, 68 jurisdictions signed the MLI during a signing ceremony hosted by the OECD in Paris. Further, 32 additional jurisdictions (including Mongolia) have signed the MLI following the first ceremony.