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On 7 June 2017, South Africa was one of more than 70 countries that signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). Taxand South Africa discusses the significance of South Africa signing multilateral convention to prevent BEPS in terms of pension funds.
The MLI is the result of certain of the Organisation for Economic Co-operation and Development’s action points aimed at preventing base erosion and profit shifting (BEPS). It is aimed at facilitating swift, coordinated and consistent implementation of treaty-related BEPS measures in a bilateral context. In particular, it is intended to function as a mechanism to facilitate agreement to changes to treaties without the need for time consuming bilateral renegotiation.
The MLI applies to the signatories thereof that have taken the necessary steps to ratify it. Each party that has signed or will sign the MLI has provided or will provide a list of reservation and notifications, in terms of which it notifies:
Provided that South Africa and the other Contracting State are both parties to the MLI and have both deposited notifications that the agreement is covered by the MLI (Covered Agreement), the MLI may, depending on the reservations and notifications of each Contracting State, amended the existing provisions of the Covered Agreement.
Discover more: The significance of South Africa signing multilateral convention
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Provided that the pension fund qualifies as a resident of an existing treaty and such treaty constitutes a Covered Agreement, the pension fund will have to consider if it constitutes a qualified person in terms of the above in order to be entitled to the benefits of the agreement. Therefore, a pension fund should take advice whether it will constitute a qualified person for purposes of the MLI.