Kassel, Germany

Germany: Implementation of Multilateral Instrument (MLI)

By Bernhard Schwechel, FACT GmbH Wirtschaftsprüfungsgesellschaft

In 2016, the OECD presented the Multilateral Instrument (MLI), which is intended to implement measures against Base Erosion and Profit-Shifting (BEPS) in a majority of double-taxation agreements simultaneously. The aim is to create international minimum standards to prevent the abuse of double taxation agreements (DTAs).

The MLI serves as a substitute for lengthy negotiations between the countries involved in individual DTAs. The MLI should now make it possible to update DTAs of a total of more than 100 countries simultaneously and, if possible, without great administrative effort after a corresponding selection.

The MLI contains formulations for implementing the findings of the OECD’s BEPS report on various topics within DTAs (including preventing treaty abuse according to BEPS Action Item 6, preventing the artificial avoidance of permanent establishment status according to BEPS Action Item 7, or improving the effciency of dispute resolution mechanisms according to BEPS Action Item 14). In this context, the MLI itself acts as a legal basis, so that the content of the existing DTAs themselves does not need to be changed. When interpreting the DTAs, the MLI must therefore be applied in future. However, this requires the ratification of the MLI in the individual contracting states.

After the MLI had only entered into force in 36 countries in February 2020, the German Bundestag and the German Bundesrat also adopted the Federal Government’s draft of a corresponding MLI Implementation Act in October and November 2020.

The Implementation Act for the Multilateral Instrument (MLI) was published in the Federal Law Gazette in February 2021; the instrument of ratification was deposited with the OECD. This formally concludes the ratification process in Germany.

In a next step, the 14 DTAs (for example: Italy, France, Spain) designated in the MLI will be amended in further legislative procedures. Before the amendments are confirmed, Germany will conduct consultation procedures with the other countries in order to reach agreement on the effects brought about by the MLI.

Only then will the amendments to the DTAs become effective, provided that the respective other state has also notified the corresponding DTA to the MLI and implemented it domestically. The applicability of the MLI to German DTAs is therefore not expected before 2022, and possibly not until 2023.


Bernhard Schwechel

Bernhard Schwechel

GGI member firm
FACT GmbH Wirtschaftsprüfungsgesellschaft
Tax, Auditing & Accounting, Advisory, Corporate Finance, Fiduciary & Estate Planning
Kassel, Germany
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FACT GmbH Wirtschaftsprüfungsgesellschaft is a tax consultancy, public auditing company, and law firm located in Kassel, known as the heart of Germany. FACT provides German and international accountancy and tax services to companies and individuals. The expe rienced team works on cross-border issues for German clients as well as for foreign clients. FACT works closely with its clients and responds rapidly to their needs.

Bernhard Schwechel is a Managing Partner of FACT GmbH and is experienced in the field of international taxation. His areas of expertise include tax and business advice for large multinational corporations and mid-size companies, as well as for internationally oriented individual clients. He supports his clients in inbound and outbound M&A projects.


Published: International Taxation Newsletter, No. 14, Spring 2021 l Photo: Comofoto - stock.adobe.com

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