The Australian Taxation Office (ATO) has published a Memorandum of Understanding signed with Canada setting out how both countries will apply Part VI (Arbitration) of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI).
Part VI is an optional MLI provision. Where two treaty partners both elect to apply it, unresolved mutual agreement procedure (MAP) cases may be submitted to binding arbitration after a set period. The MOU translates that framework into operational practice for the Australia-Canada treaty relationship, covering how arbitration requests are to be made, what minimum information must accompany a request, how arbitrators are appointed, and how the arbitration process itself is to be conducted.
The publication of the MOU gives taxpayers and practitioners a clear procedural map for cases that exhaust MAP without resolution. Both the ATO and the Canada Revenue Agency are bound by the agreed process, which should reduce uncertainty about the mechanics of invoking arbitration under the bilateral relationship.