India deposits instrument of ratification of MLI with OECD

Post approval of ratification of MLI by India, the instrument of ratification along with the list of reservations to the MLI provisions and list of covered tax agreements was deposited with OECD on 25th June, 2019.  So far, 89 jurisdictions have signed the MLI, out of which 28 countries including India have already ratified this convention. As such, MLI shall come into force in India w.e.f 1st October, 2019.

However, deposit of instrument of ratification by India shall not by itself amend all the treaties entered into by India. In order that MLI provisions become effective for a particular treaty, both the tax jurisdictions being a party to the treaty should have not only ratified the MLI, but should also have included the said treaty within the covered tax agreement (CTA) and should have made similar reservations while adopting a particular provision of MLI.

MLI provisions need to be analysed in detail whenever tax treaties need to be relied upon as MLI shall modify the extent of application of treaty by aligning it with measures specified under BEPS Action Reports such as principal purpose test, simplified LOB etc. Any transaction undertaken in violation of MLI provisions in future could have huge tax implications.

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