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Qatar signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS

On 4 December 2018, Qatar signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the Multilateral Instrument or MLI). Once ratified, the MLI will modify the effect of many Qatari tax treaties. Businesses operating in Qatar should review their holding, financing, intellectual property (IP) and supply chain structures to ensure that:

  • The structures remain relevant in light of current and potential business needs and Base Erosion and Profit Shifting (BEPS) developments
  • The MLI will not limit access to benefits under Qatari tax treaties

Detailed discussion


Since the Organisation for Economic Co-operation and Development (OECD) and G20 countries adopted a 15-point BEPS Action Plan in 2013, BEPS has remained a key priority for governments around the globe. The Final Reports, issued in 2015, represent a package of measures that governments should implement to address features of tax regimes that facilitate BEPS. The package includes a set of minimum standards.

In November 2017, Qatar became the 106th country to become an Associate Member of the BEPS Inclusive Framework, committing Qatar to align with the shared international consensus on international tax rules. On 4 December 2018, Qatar became the 85th jurisdiction to sign the MLI, which is an important step in implementing the minimum standard relating to tax treaty abuse.

This Alert focuses on the MLI, and what it might mean for businesses located in Qatar.


One of the BEPS minimum standards (Action 6) involves the prevention of treaty abuse, where taxpayers claim treaty benefits that the treaty countries did not intend to grant. Treaty shopping is one example, when a multinational may establish a passive holding company in a jurisdiction solely to benefit from preferential treaty rates available to tax residents in that jurisdiction.

The minimum standard under Action 6 requires countries to implement rules in their treaties that limit the opportunities for treaty abuse. For existing treaties, this would be a problematic exercise if bilateral solutions (i.e., treaty renegotiation) were required. The MLI was developed to address this. The MLI allows a signatory to indicate those of its treaties (referred to as Covered Tax Agreements or CTAs) to which the MLI will apply. If the treaty partner is also a signatory and identifies the treaty as a CTA, the MLI provisions will be incorporated into the bilateral treaty once the MLI is ratified by both countries.

At the time of signing the MLI, Qatar submitted a list of 84 double tax treaties to be designated as CTAs, and amended through the MLI. The list includes all 73 double tax treaties that Qatar has in force, as well as 11 treaties that have not yet entered into force.

Together with the list of CTAs, Qatar also submitted a preliminary list of reservations and notifications (MLI positions) in respect of the various provisions of the MLI. The definitive MLI positions as well as the final list of CTAs will be provided upon the deposit of its instrument of ratification, acceptance or approval of the MLI.

Effect of the MLI provisions

Many MLI provisions allow each country to either decide whether to adopt the provision, or to select one of several possible approaches on an issue. When the MLI is applied to a CTA, the lower of the standards that the two countries adopt will apply to that CTA.

Generally, where positions in the MLI are optional, Qatar has elected not to adopt them. For issues on which each country must adopt a position, Qatar has generally adopted the position that has the least effect on CTAs. Many countries have adopted a similar approach. However, Qatar has been required to adopt a position on several key issues that could significantly affect the application of Qatari tax treaties.

New preamble

The MLI requires countries to adopt a preamble that updates the objective of CTAs:

  • Eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided for the indirect benefit of residents of third jurisdictions)
  • Further develop their economic relationship and enhance the cooperation in tax matters

Because the preamble forms part of the context of a treaty, the statement and objectives should be taken into account when interpreting provisions of the tax treaty, including anti-abuse rules inserted by the MLI.

Principal purpose test

The main component of Action 6 was to choose between the limitation of benefits (LOB) and principal purpose test (PPT) approach to tax treaty abuse:

  • LOB would limit the availability of treaty benefits to entities that meet certain conditions, based on the legal nature, ownership in, and general activities of the treaty
  • The more general PPT is based on the principal purposes of transactions or arrangements. If one of the principal purposes is to obtain treaty benefits, these benefits may be denied unless it is established that granting these benefits would be in accordance with the object and purpose of the provisions of the treaty

Qatar has chosen to apply the default PPT rule in its CTAs.

The PPT is most likely to affect outbound investment. Currently, a Qatari entity will generally be able to obtain treaty relief based on demonstrating that it is tax resident in Qatar (e.g., based on a tax residence certificate) and if necessary demonstrating that the beneficial owner of income is resident in Qatar. It is also possible that countries may initially have difficulty in understanding the rules and apply PPT inconsistently, so it may take some time before it is clear what approach each country will adopt to applying PPT.

Enhancing dispute resolution

The MLI contains a provision that allows taxpayers to initiate a Mutual Agreement Procedure (MAP) to resolve treaty problems with either party to a CTA. Qatar has not made a reservation on this provision.


The Qatari Government’s decision to join the Inclusive Framework and commit to implementing the BEPS minimum standards will help to strengthen Qatar’s business and investment reputation in the Middle East. Signing the MLI is an important step in the ongoing BEPS process.

Businesses operating in Qatar need to review their holding, financing, IP and supply chain structures to ensure that they remain relevant in light of current and potential business needs and BEPS developments, and to reduce the risk that the MLI could impact access to benefits under Qatari tax treaties. Businesses should also review their operational requirements and determine whether new business models should be adopted.

Beyond the ratification of the MLI, businesses will need to monitor how the tax authorities in jurisdictions where Qatari entities invest or operate apply the PPT rule. Businesses also need to monitor how those jurisdictions address broader BEPS concerns. Outside the minimum standards, several Actions focus on tightening the rules for measuring income, such as interest deductibility. BEPS initiatives will create significant challenges for groups whose income recognition does not align with value creation.

EYG no. 012313-18Gbl

 Download this Tax Alert as a PDF file.

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