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Ratification of the Multilateral Instrument to Implement Tax Treaty

On 13th of May 2020, the Czech Republic deposited at the OECD headquarters in Paris the instrument of ratification for the Multilateral Convention to Implement Tax Treaty Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument - MLI). The MLI has been signed by a total of 94 states and so far 47 have been ratified. The Convention will enter into force for the Czech Republic on 1st of September 2020, amending the Convention between the Government of the Czech Republic and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital, signed in 1999.

The Czech Republic signed the multilateral instrument on 7th of June 2017, with the aim of participating in cooperation in the area of ​​transfer prevention of profits on a global scale and advance further the measures resulting from bilateral agreements with 52 countries around the world.

 The MLI is a tool through which many double taxation treaties can be amended. However, the Czech Republic implements only the most necessary minimum - the so-called minimum standard - the preamble on the purpose of the contract, the rule against abuse (the so-called principal purpose test) and the adjustment of the procedure for resolving cases.

The Convention will enter into force for the Czech Republic on 1st of September 2020, with the date of entry generally derived (with some delay) from ratification by both MLI signatories, which in the case of India happened on 25th of June 2019. Both countries through these steps reflect, that they stand side by side in the fight against the shifting of corporate profits from places of economic activity.


Milan Dostál, Economic Diplomat, Embassy of the Czech Republic in Delhi