MLI & the principal-purpose test — what part of this actually needs a professional?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: its principal-purpose test denies a benefit where obtaining it was a principal purpose of an arrangement, unless granting it accords with the treaty's object.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
How do I know whether the MLI has changed my tax treaty?
You cannot tell from the treaty document alone. The multilateral instrument modified parts of a large number of existing treaties without rewriting any of them, so the text you downloaded may no longer be the text in force between those two countries. What governs is the original treaty as modified, read together with what each of the two countries chose to adopt and what each reserved out. Checking that combination, for the specific article you are relying on and the specific pair of countries, is now a step in forming any treaty position rather than an optional extra.
What is the principal purpose test in plain English?
It is a rule that lets a country refuse a treaty benefit where obtaining that benefit was a principal purpose of the arrangement, unless granting it would accord with the object and purpose of the relevant treaty provisions. Two things follow. It looks at purpose, so the commercial reason for an arrangement matters as much as its legal form. And it is not confined to artificial structures: an arrangement can be perfectly lawful and still fall to be tested. The defence is contemporaneous evidence of why the arrangement exists, which is far easier to assemble at the time than years later.
Does the MLI apply to a holding company set up years ago?
The question is not when the company was formed but which treaty text applies to the payment you are making now. Where the instrument has modified the treaty between the two countries concerned, the modified text governs current payments regardless of how old the structure is. That is why structures that were reviewed once, on the text as it then stood, are the ones most often exposed. The useful exercise is to re-test the entity against the eligibility rules and the purpose test as they now read, and to record the commercial rationale that has kept it in place.
Can a treaty benefit be refused even though nothing we did was unlawful?
Yes, and that is the part that surprises people. The test is about purpose, not legality. An arrangement can comply with every domestic rule in both countries and still be caught, if obtaining the benefit was one of its principal purposes and granting it would not accord with the object and purpose of the provision relied on. Equally, an arrangement with a genuine commercial reason is not caught merely because it happens to be tax-efficient. What decides it in practice is whether the commercial purpose was documented when the decision was taken.
Where do I find the version of the treaty that is actually in force?
From the two countries themselves. Each publishes its treaty position and, in many cases, a consolidated or synthesised reading showing the original article beside the modification. The two published readings should agree; where they do not, that disagreement is itself the finding. Working from a single downloaded treaty is the common failure, because the document looks complete and gives no indication that anything sits on top of it. Check the article you are relying on, for the country pair in question, and keep a copy of what you checked with the file.
Do both countries have to adopt the same MLI provision for it to apply?
Broadly, a provision takes effect between two countries where the choices they each made line up, and reservations can keep a provision out of a particular relationship altogether. That is why a change in force under one treaty may be absent from another, and why an answer researched for one country pair cannot be carried across to a second. Each relationship has to be read on its own terms. In practice this means the same group can hold different positions for different subsidiaries, each of which needs its own record of what was checked.
What is a totalization agreement and how do I use one?
A social security agreement that stops you contributing to two systems for the same work, and lets periods in both count towards benefit eligibility in either. Which system you stay in depends on the agreement's rules for your situation — a seconded employee usually remains in the home system for a set period, a locally hired one usually joins the host system. You evidence it with a certificate of coverage obtained before or shortly after the assignment starts. See certificates of coverage.
Which countries have a tax treaty with the United States?
Around sixty, including Canada, the United Kingdom, India, Australia and most of western Europe — but the list matters less than the terms, because each treaty caps rates and allocates income differently. Two countries with treaties can produce opposite answers on the same pension or the same royalty. What decides your position is the specific article covering your income type. See our country guides.
