The MLI requires boards to make the decisions

BEPS’ Multilateral Instrument (MLI) came into effect on June 7. Articles 12 to 14 of the MLI include changes to Permanent Establishment rules which impact fund directors. Directors will have to show that they are making ‘material modifications’ to funds, according to the MLI.

The principle behind BEPS’ rules on Permanent Establishment, Action Plan 7, is to align a company’s economic activity with where it pays its taxes. It is intended to stop companies using low tax jurisdictions as a location to book profits. Companies will need real and demonstrable substance there in future.

Of importance to the alternative asset management industry, and particularly to fund directors and the jurisdictions in which they reside, is how tax authorities are going to interpret Articles 12 to 14 of the MLI. Those in the industry that The NED has to about this believe the changes to Permanent Establishment rules means that funds will need to be able to show that their directors are real decision makers.

To read more on this story see the June edition of The NED.