Australia and Canada have formalised procedures for applying the MLI arbitration framework through a new Memorandum of Understanding, establishing clear rules for resolving eligible cross-border tax treaty disputes via binding arbitration.
The Australian Taxation Office (ATO) has published a Memorandum of Understanding (MoU) with Canada outlining the application of Part VI (Arbitration) of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).
This Memorandum of Understanding outlines the specific procedures for resolving tax disputes between Australia and Canada through an independent arbitration process. It establishes clear guidelines for submitting cases, selecting impartial arbitrators, and maintaining confidentiality throughout the proceedings.
The MoU details a “final offer” system where a panel chooses between proposed resolutions to resolve issues like double taxation and residency status. Additionally, it defines the financial responsibilities of each nation and specifies which legal areas are excluded from this mandatory resolution framework. This agreement serves as a formal roadmap for implementing international tax treaty measures intended to prevent fiscal evasion.
The Memorandum of Understanding was signed by Australia on 20 July 2026 and by Canada on 31 July 2026, becoming effective on the date of the second signature, 31 July 2026.
