The Australian Taxation Office has published a Memorandum of Understanding with Japan establishing arbitration procedures for unresolved tax disputes, setting out submission requirements, arbitrator selection criteria, confidentiality standards, and resolution methods under Part VI of the Multilateral Convention.
The Australian Taxation Office (ATO) has published a Memorandum of Understanding (MoU) with Japan, outlining the specific arbitration procedures established between the governments of both countries to resolve unresolved tax disputes.
It serves as a practical framework for implementing Part VI of the Multilateral Convention, aiming to eliminate double taxation and prevent tax avoidance through a structured mutual agreement process.
The MoU details the legal requirements for submitting a case, the criteria for selecting impartial arbitrators, and the strict confidentiality standards that must be maintained throughout the proceedings. Additionally, it defines the two primary methods of resolution—final offer arbitration and independent opinion arbitration—while clarifying which types of tax cases are eligible for review. By setting clear deadlines and administrative rules, this agreement ensures that both nations have a transparent path to settle international tax conflicts effectively.
To initiate the process, a request must be made in writing to the competent authority of either Australia (Australian Taxation Office) or Japan (National Tax Agency). This request must include a written statement confirming that no court or administrative tribunal has already rendered a decision on the same issues. The competent authorities have 60 days from receiving the request to jointly determine the “Terms of Reference,” which outline the unresolved issues to be decided by the arbitration panel.
Arbitration decisions are made by a simple majority, are non-precedential, and must be implemented through a mutual agreement within 180 days. However, Australia and Japan have both reserved the right to exclude cases involving their respective anti-avoidance rules from arbitration, and decisions may be invalidated if a court finds a breach of impartiality, confidentiality, or collusion.
The arrangement generally applies to cases submitted to the competent authority of either country on or after 1 January 2019, the later of the dates on which the BEPS Multilateral Instrument (MLI) entered into force for both countries.
