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Tax EssentialsUnderstanding the Multilateral Instrument (MLI)December 2019 Australia

Tax Essentials Understanding the Multilateral Instrument (MLI) Overview Under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), more than 125 countries are collaborating. The MLI is an outcome of BEPS Action 15 and is designed to swiftly implement the tax treaty-related measures arising from theG20/OECD BEPS project, without the need to renegotiate each double tax treaty. A total of 90 jurisdictions1 have signed the MLI, and six others have expressed intent to do so. The MLI is expected (over time) to modifymore than 1,600 double tax treaties. The way that the MLI impacts a particular double tax treaty will depend upon the respective MLI positions of the two countries – so theimpact of the MLI will differ from treaty to treaty. The timing of the impact of the MLI on a particular tax treaty will firstly depend upon when the MLI is formally ratified by the two relevantcountries, and then will differ as between withholding taxes, other taxes and mutual agreement procedure/arbitration. The MLI is already in effect for several of Australia’s tax treaties. This Tax Essentials provides an overview of the way the MLI will affectdouble tax treaties, and considers some of practical issues. For more details on which of Australia’s tax treaties have been impacted bythe MLI, refer to the Deloitte Tax Insights publication that can be accessed here.Broad Architecture of the MLIMLI consists of 39 Articles (MLI Articles):MLI Articles 1 & 2 set out the scope of MLI and theinterpretation of terms used thereinMLI Articles 3-17 deal with BEPS-relatedtreaty measuresExplanatory Statement tothe MLI amplifies theunderstanding of MLIArticlesOECD website includes alist of signatories of theMLI, information on theArticles of the MLI thatthese signatories havechosen to opt, and an MLIMatching Database (link)MLI Articles 18-26 cover provisions related to mandatorybinding arbitrationMLI Articles 27-39 contain procedural provisions suchas provisions relevant to adoption & implementation ofthe MLI including ratification, entry into force, entry intoeffect dates, withdrawal, etc.1.2OECD status as of 30 October 2019. 37 jurisdictions have deposited their instruments of ratification, acceptance or approval with the OECDalong with the list of their MLI positions (reservations and notifications)

Tax Essentials Understanding the Multilateral Instrument (MLI)Structure of the MLIThe various articles in the MLI are generally based upon the post-BEPS treaty provisions as included inthe November 2017 update to the OECD Model Convention.Minimum standard MLI provisionsJurisdictions that sign the MLI are required to adoptMLI provisions forming part of the agreed minimumstandards.1234 MLI Articles 6 and 7 reflect the minimum standardfor prevention of treaty abuse under BEPS Action 6 MLI Article 16 reflects the minimum standard forimprovement of dispute resolution under BEPSAction 14Optional MLI provisionsThe MLI allows countries to opt into additionalprovisions in the MLI. The impact on a particulartax treaty will depend upon various opt in/opt outchoices made by both countries. Optional changes totax treaties in the MLI include changes to modify taxtreaties in respect of: Permanent establishments (PEs) Transparent entities Residency tiebreakers Minimum shareholding periods Capital gains derived from immovable property and, Mandatory binding arbitration.Opting out of these MLI provisions (forming partof agreed minimum standards) is possible only inlimited circumstancesFor such MLI provisions, there is generally flexibilityto opt out of either all or part of the provision. Thesechoices will form a country’s MLI positions.MLI structure overviewMLIPartBEPSActionIDeals withMinimumstandardScope andinterpretationIncludesDefinitionsII2Hybrid mismatchesNoTransparent entitiesDual resident entitiesIII6Treaty abuseYesPurpose (preamble)Treaty abuseNoDividend transfertransactionsPEs in third StatesCapital gains from the alienation ofshares, etcRestriction of a right to tax its ownresidentsIV7Avoidance of PE statusNoExpanded scope dependentagent PEContract splittingPreparatory & auxiliary activitiesV14Improving disputeresolutionYesMutual agreementprocedureCorresponding adjustmentsVIArbitrationNoVIIFinal provisions3

Tax Essentials Understanding the Multilateral Instrument (MLI) Each party to the MLI must notify tax treaties to which the MLI provisions apply.The MLI provisions will apply to a tax treaty only if both parties to the tax treatynotify it as Covered Tax Agreement [CTA]For a specific bilateral tax treaty, the MLI will have effect after both parties to aCTA have deposited their ratification instruments with the OECD SecretariatThe MLI will modify the application of all CTAs at least to the extent of theimplementation of the BEPS minimum standards:1) Counter treaty abuse through MLI Article 6 (purpose of a CTA) and MLI Article7 (prevention of treaty abuse)2) Improve dispute resolution through MLI Article 16 (mutual agreementprocedure)How the MLIOperates?Flexibility to implement BEPS tax treaty measures in various ways: Choices to apply optional and alternative provisions Reservations to opt out of provisions or parts of provisions that are notminimum standards (either for all CTAs, or selected CTAs)The MLI functions differently than a protocol to an existing treaty. The MLIsits alongside an existing double tax treaty, modifying its application on BEPSmatters. The MLI provisions apply in place of, or in the absence of particularprovisions in a CTA, or apply to modify an existing provision of a CTA. As apractical matter, the process of determining which MLI Articles modify a CTA,and how they do so, is complex.Some tax authorities, including the Australian Taxation Office (ATO) have startedto publish “synthesised texts”, reflecting the modifications made by the MLI toa particular tax treaty to simplify the interpretation and application of the MLIto a tax treaty. These synthesised texts are typically prepared jointly by bothtax authorities and represent their shared understanding of the modificationsmade to a particular tax treaty by the MLI. However, the synthesised text is notlegally binding.Applying the MLI to a tax treatyThe way that the MLI impacts a particular CTA will depend upon therespective MLI positions of the two countries – so the impact of theMLI will differ from treaty to treaty. Generally, it is only where bothcountries have adopted a MLI provision that the MLI will relevantlymodify the particular tax treaty.As such, where Australia has opted out of a MLI provision, thatprovision will generally not impact the relevant treaty, irrespectiveof the position of the treaty partner. For example, New Zealand hasadopted the expanded scope PE definition under MLI Article 12.However, as Australia has made a reservation on this matter, theAustralia/New Zealand treaty is not modified on this matter, as onlyone country has agreed to the expanded scope definition.2.Refer -prevent-beps.htm3.For a taxable period ending 30 June (such as Australia), the MLI should apply to taxes levied by that country for taxable periods commencing on or after 1 July2019. If a taxable period in a country follows a calendar year, the MLI should apply to taxes levied by that country for taxable periods commencing on or after1 January 20204

Tax Essentials Understanding the Multilateral Instrument (MLI)Entry into force of the MLICountries which have signed the MLI need to ratify the MLI inline with their domestic arrangements and the OECD ratificationprocess. Thereafter, the MLI can enter into force for a specific treatythree clear months after ratification by both countries.Preconditions for the entry into force is that a country must have:1. Completed its domestic law requirements to ratify the MLI2. Deposited the Instrument of Ratification, Acceptance orApproval with the OECDThe OECD acts as the ‘depositary’ of the MLI and any subsequentprotocols (Article 39 of the MLI). The depositary publishes andupdates on a regular basis the list of all signing countries, thesigning date, the date of deposit of the Instrument of Ratification,Acceptance or Approval, and the date of entry into force of theMLI for a signing country. The depository also maintains lists ofreservations and notifications to the MLI provisions made by eachcountry both at the time of signature and ratification of the MLI2.MLI entry into effect for a particular tax treatyOnce the MLI has entered into force between Australia and a treatypartner country, the MLI enters into effect with respect to thatparticular CTA as follows:A. For withholding taxes: where the event giving rise to suchtaxes occurs in the calendar year that begins on or after the laterdate of entry into force of the MLI for Australia and the treatypartner. For example, if both treaty partners ratified the MLI before30 September 2018, the MLI entered into force on or afterB. For all other taxes: the MLI will apply to taxable periodsbeginning on or after 6 months after the later date of entry intoforce of the MLI for Australia and the treaty partner. For example, ifthe MLI entered into force for both countries on 1 January 2019, theMLI should apply to taxable periods starting on or after 1 July 20193C. For MAP and mandatory binding arbitration: the MLI willapply on or after the latest of the dates of entry into force of theMLI for Australia and the treaty partner. For example, if both treatypartners ratified the MLI in September 2018, the MLI enteredinto effect on 1 January 2019 for MAP and arbitration purposes.Notably, cases may be eligible even where the dispute relates to aperiod before the MLI was in force5

Tax Essentials Understanding the Multilateral Instrument (MLI) Tax Essentials Understanding the Multilateral Instrument (MLI)The Australian Story24 November 2016Publication of the MLI7 June 2017 – Signing ceremony68 jurisdictions includingAustralia signed the MLI24 August 2018The MLI was given theforce of law in Australia bythe Treasury LawsAmendment (OECDMultilateral Instrument) Act2018, which received RoyalAssent on 24 August 2018.1 July 2018MLI entered into forceDeposit of ratificationinstrument with the OECDSecretariat by Australia –26 Sep2018MLI enters into forcefor Australia1 Jan201944.That is, on the first day of the month following theexpiration of three months beginning on the dateof deposit of ratification instrument by Australiawith the OECD Secretariat5.For more detail refer to Deloitte Tax Insightspublication that can be accessed here632 of Australia’s tax treatieswill be modified by the MLI5

Tax Essentials Understanding the Multilateral Instrument (MLI)Key impact areas for Australian Tax TreatiesKey modifications in Australian Tax TreatiesPreventing taxtreaty abuse Minimum standard under BEPSAction 6 to tackle treaty abuse, i.e.,insertion of new preamble andprincipal purpose test (PPT) in allAustralian CTAs PPT to replace/supersede existinggeneral anti-abuse provisions in CTAs,or to be added in the absence ofsuch provisionsDual residency& new tiebreaker test Tie breaker test in case of dualresidency of person (other thanan individual) to be now decidedby competent authority of the CTApartiesImproving disputeresolution Improved mutual agreementprocedure (MAP) outcomes[Minimum standard under BEPSAction 14] In some cases supplemented byarbitration.These processes should lead to greatercertainty for taxpayersFor evaluating the extent of the MLI impact on Australia’s tax treaties, Australia’s MLI positions need to be compared with the MLI positionstaken by its counterpart.7

Tax Essentials Understanding the Multilateral Instrument (MLI) Australia’s key CTAs’ MLI positionsThe impact of the MLI on a particular double tax treaty (also referred to as a Covered tax Agreement or CTA) will depend upon the variousMLI positions adopted by both countries. Broadly, where Australia and a treaty partner have differing MLI positions with respect to aspecific provision, the relevant MLI provision will not apply. Appendix 1 includes a detailed description of Australia’s MLI positions.UK Sing. aMLIArt.CanadaThe Table below sets out Australia’s key CTAs’ MLI positions and the likely impacts on a number of Australia’s tax treaties.Hybrid mismatch3Transparent entities4Dual resident entities Treaty abuse5Elimination of double taxation6Preamble 7PPT 8Dividend transfer 9Capital gains: Land rich 10Third State PE11Taxation of own residents Permanent establishment status12Dependent agent PE13(1)Preparatory & auxiliary 13(4)Anti-fragmentation rule 14Contract splitting 15Closely related Improving dispute resolution16MAP17Corresponding adjustments ArbitrationPart VI8

Tax Essentials Understanding the Multilateral Instrument (MLI)Some practical issuesAt this stage, much of the MLI focus is on theinitial entry into force and effect. It is howeverexpected that many issues will emerge astaxpayers grapple with the meaning andoperation of the new MLI provisions. Wecomment below on two matters.1) Principal purpose testPPT – A source of uncertaintyUnder the PPT (Article 7 of the MLI), a treaty benefit in respect ofan item of income may be denied if it is reasonable to conclude,having regard to the facts and circumstances, that obtaining thatbenefit was “one of the principal purposes” of the arrangementor transaction, where that arrangement or transaction resulteddirectly or indirectly in that treaty benefit. However, the PPTwill not be triggered if the granting of that treaty benefit in thecircumstances is in accordance with the ‘object and purpose’ of therelevant tax treaty.The updated OECD Commentary contains examples of theoperation of the PPT that suggest that “object and purpose”considerations should be interpreted as equating with theexistence of economic substance in the relevant treaty country.However, this is not expressly stated in the PPT itself and thus therecould very well be some variance of approaches.Whilst Australian taxpayers are familiar with the concept of soleor dominant purpose via the general anti-avoidance rule, thelower test of “one of the principal purposes” is increasingly beingadopted, including under the MAAL and the Diverted Profits Tax(DPT) and the Targeted Integrity Rule.The positive limb has such a low threshold (“one of the principalpurposes”), that it could well be applied by tax authorities to manytransactions and structures which involve treaty benefits. The PPTcould potentially apply to an arrangement or transaction, evenwhere that arrangement or transaction was entered into a numberof years ago (i.e., prior to the MLI modifying the relevant tax treaty).It also remains to be seen how much comfort can be taken fromthe exclusion under the second limb.It can be expected that the PPT will become the source ofuncertainty, debate and dispute as taxpayers and tax authoritiesaround the world grapple with coming to a common understandingas to the meaning of “one of the principal purposes”. The updatedOECD Commentary discusses the potential application of thePPT with reference to various examples, however the outcomesin practice will ultimately depend on the specific facts andcircumstances of each case.Based on the latest Deloitte BEPS survey, a large majority ofAustralian respondents (76%) are concerned about a lack ofguidance from the foreign tax authorities on the PPT in the MLI.Also, almost half of Australian respondents (44%) are concernedthat the ATO has not provided clear guidance on how it plans tointerpret the PPT in the MLI. However, at the time of writing, theATO is working on a Draft Practical Compliance Guideline and Draftlaw Administration Practice Statement which should, when issued,explain the ATO’s proposed approach to the PPT.Interaction with existing lawsFrom an Australian perspective, there are already a range ofdomestic law provisions and treaty provisions that mayaddress some of the perceived abuses at which the PPT istargeted, including: Australia’s general anti-avoidance rule could potentially operateto deny treaty related benefits, if there is a sole or dominantpurpose to obtain an Australian tax advantage. Whilst TD2010/20 is necessarily general, it indicates that the ATO considersthat, at least in certain circumstances, the relevant purpose inconnection with an Australian tax benefit in some treaty shoppingcases may rise to the level of being a sole or dominant purpose. The DPT could potentially operate to deny related treaty benefits,if there is a principal purpose to obtain an Australian taxadvantage. The MAAL is Australia’s unilateral BEPS response aimed at theavoidance of PE status in Australia by overseas entities. A number of Australia’s existing treaties include a specific mainpurpose test provision that applies to the Dividend, Interest andRoyalty Articles, i.e. benefits under such Article can be deniedif it is a main purpose of the arrangement to take advantage ofthis Article. Further, Australia’s double tax treaties with Germany,Switzerland and Israel already contain a comprehensive PPT thatapplies across all provisions of the treaty. The commencement of the MLI will allow the PPT to apply acrossall Australia’s CTAs (subject to the treaty partner’s ratification ofthe MLI and entry into effect). Therefore, the commencementof the MLI will raise an additional risk for the allowance of treatybenefits by Australia.Additional risks and uncertainties will also arise for multinationalgroups that are claiming treaty benefits under a number ofdifferent treaties, as it is likely that various tax authorities aroundthe world will bring different approaches to the applicationof the PPT.9

Tax Essentials Understanding the Multilateral Instrument (MLI) 2) Dual resident companies (Article 4(1) of the MLI) –new tiebreaker ruleGiven the ATO’s new interpretation of the Central Managementand Control (CMAC) test (including split CMAC) in Taxation RulingTR2018/5 and PCG 2018/9, circumstances of dual residence arelikely to increase. For example, a foreign incorporated subsidiaryof an Australian parent may be tax resident in a foreign country(based on an incorporation test) and may also be tax resident inAustralia (based on a CMAC test).Where a company is a dual resident and is looking to apply theprovisions of a tax treaty impacted by the MLI, this will requirecareful analysis.The ATO and the New Zealand Inland Revenue released on 27May 2019 a joint administrative approach dealing with how thecorporate residency tiebreaker under MLI Article 4(1) will be jointlyexercised (ATO). This joint administrative approach is intendedto provide certainty and minimise compliance costs for “lowermateriality” taxpayers as to their residency status for treatypurposes. As such, the administrative approach applies where a“taxpayer’s group annual accounting income is less than AUD 250million. Taxpayers that satisfy all the eligibility criteria can selfdetermine their place of POEM for the purposes of the Australia/New Zealand tax treaty. At this stage, this approach will only beimplemented between Australian and New Zealand.10The ATO has also updated its webpage as to how to apply for aCompetent Authority determination in relation to, in particular,corporate residency tiebreaker matters due to the impact of MLIArticle 4(1). In relation to the AU/NZ treaty, this would be relevantwhere the taxpayer does not fit within the conditions of theadministrative approach outlined above.Noticeably, the Board of Tax is undertaking a review of theCorporate Residency Rules. The purpose of the review is toensure these rules are operating appropriately, in light of modern,international, commercial board practices and international taxintegrity rules.The terms of reference set out by the Treasurer are for the Board toconsider whether the existing rules: Minimise commercial uncertainty and ambiguity; Are consistent with and aligned with modern day corporateboard practices; Protect the tax system against multinational profit shifting; and Otherwise support Australia’s tax integrity rules as they apply tomultinational corporations.

Tax Essentials Understanding the Multilateral Instrument (MLI)MLI’s ChallengesImmediate action is required:Analyse the impact of MLI modificationson existing arrangementsMLI is now a reality:Impact on existing & prospectivecross-border arrangementsMLIPPT & GAAR rules interplayHow will PPT rules interplay withAustralia’s general anti-avoidance rules(GAAR) including MAAL & DPTCMAC & new tie breaker rulesinteractionWhere a company is a dual resident& is looking to apply a tax treatyimpacted by the MLI, this willrequire careful analysisMLI impact will grow over thecoming years:MLI PPT will progressively become apowerful tool to deny treaty benefitsInnovative but complex tool:Disputes/Uncertainties/Issues willemerge over time11

Tax Essentials Understanding the Multilateral Instrument (MLI) Treaty AbuseHybrid MismatchesAppendix 1: Australia’s MLI positions12MLI ArticleBrief description of the ArticleAustralia’s final positionArticle 2: Interpretationof termsNotification of tax treaties covered by MLIconventionAustralia has notified 43 out of 45 taxtreatiesTax treaties not notified by Australia:Germany and Israel (both are BEPScompliant).Article 3:Transparent entities(Optional Article)Treaty benefits will be granted for income derivedthrough fiscally transparent entities, such aspartnerships or trusts, but only where one of thetwo countries treats the income as income ofone of its residents under its domestic law. Theserules will not prevent either country from taxingits own residents.Australia has adopted Article 3 but willpreserve existing corresponding bilateraldetailed rules where appropriate.Article 4:Dual resident entities(Optional Article)Most treaties use an entity's place of effectivemanagement (POEM) as the key tiebreaker testto determine a dual resident's country of taxresidence for treaty purposes. Under Article4, the tiebreaker will instead be determinedpursuant to mutual agreement of both countries,having regard to prescribed factors, i.e. POEM,the place of incorporation and any other relevantfactors. Countries have the option to allow theirtax authorities to grant treaty benefits in theabsence of such a mutual agreement.Australia has adopted Article 4 but notthe rule that would allow the two taxadministrations to grant treaty benefits in theabsence of such an agreement.Article 5:Application of methodsto eliminate doubletaxation(Optional Article)Three options will ensure that countries relievedouble taxation by crediting foreign tax againstdomestic tax rather than by exempting foreignincome from domestic tax.Australia has not adopted:Article 6:Purpose of CTA(minimum standard)Introduces preamble text in CTA stating thatthe jurisdictions intend to avoid creation ofopportunities for non-taxation or reducedtaxation through tax evasion or avoidance, andthrough treaty shopping arrangements. Article 5 because all of its treaties apply thecredit method in relieving double taxationfor Australian residents the provisions that would prevent othercountries from applying their chosenpositions under Article 5.Australia has adopted Article 6, including theoptional text indicating a desire to furtherdevelop its economic relationships with othersignatories and enhance cooperation intax matters.

Tax Essentials Understanding the Multilateral Instrument (MLI)MLI ArticleBrief description of the ArticleAustralia’s final positionArticle 7:Prevention of treatyabuse(minimum standard)Introduces new anti-abuse rules that will enabletax administrations to deny treaty benefits incertain circumstances. Countries may choosebetween three options:A. the principal purpose test (PPT),B. the simplified limitation on benefits (LOB)provision plus PPT, or (C. the detailed LOB plus anti-conduit mechanism.Australia has adopted Article 7 and only thePPT, including the discretion not to apply thePPT in certain circumstances.If Australia’s treaty partner has also chosento adopt the PPT, there is a “match” withthe Australian approach, and the CTA withAustralia will be modified to effectivelyinclude the PPT.Treaty AbuseNote that the “PPT only” option was the mostcommon choice of countries.Article 8:Dividend transfertransactions(Optional Article)Introduces additional criteria of “365 daysminimum holding period” for the shareholder toavail concessional tax rates under CTAAustralia has adopted Article 8 withoutreservation.Article 9:Capital gains fromalienation of sharesor interest of entitiesderiving their valueprincipally fromimmovable property(Optional Article)Introduces additional criteria of “365 daysminimum holding period” in case of gains arisingfrom alienation of shares or other participationrights if such shares or rights derive morethan a specified percentage of their value fromimmovable property situated in the sourcejurisdictionOptional provision of inserting a minimum valuederivation criterion of 50 percent of their valuedirectly or indirectly from immovable propertyAustralia has adopted Article 9 but preservesexisting bilateral rules that apply to thedisposal of comparable interests (non-shareinterests) in land-rich entities.Article 10:Anti-abuse rule for PE inthird jurisdiction(Optional Article)Addresses abuse of CTAs in a triangular situationAustralia has not adopted Article 10 at thistime, pending further review of its potentialimpacts in the Australian context. This isconsistent with Australia’s current treatypractice (i.e. this rule was not adopted in thenew treaty with Germany and Israel)Article 11:Application of taxagreement to restrict aparty’s right to tax itsown residents(Optional Article)Preserves the right of jurisdiction to tax its ownresidentsAustralia has adopted Article 11 withoutreservation.13

Permanent EstablishmentTax Essentials Understanding the Multilateral Instrument (MLI) MLI ArticleBrief description of the ArticleAustralia’s final positionArticle 12:Artificial avoidanceof PE status throughcommissionaire andsimilar strategies(Optional Article)Counters artificial avoidance of PE status throughcommissionaire arrangements and similarstrategies. This provision lowers the threshold atwhich a PE arises through broadening the scopeof dependent agent PEs.Australia has not adopted Article 12 atthis time. Notably, Article 12 addressesarrangements similar to those targeted byAustralia’s Multinational Anti-AvoidanceLaw (MAAL). So, the application of MAAL willcontinue to safeguard Australian revenuefrom egregious tax avoidance arrangementsthat rely on a ‘book offshore’ model, butthere will be no (broadly) equivalent provisionvia the MLI applying to Australian residentsselling into foreign countries.However, it is expected that Australia willconsider adopting these rules bilaterally infuture treaty negotiations.For example, this provision was includedin Australia’s new treaty with Germany andIsrael.Article 13:Artificial avoidance of PEthrough specific activityexemptions(Optional Article)Most tax treaties include a list of exceptionsto the definition of permanent establishmentwhere a place of business is used solely forspecifically listed activities such as warehousingor purchasing goods. Only genuine preparatoryor auxiliary activities will be excluded from thedefinition of PE (Article 13(1) of the MLI).Australia has adopted Article 13 but preserveexisting corresponding bilateral rules.In addition, related entities will be prevented fromfragmenting their activities in order to qualify forthis exclusion (Article 13(4) of the MLI).14Article 14:Splitting up of contracts(Optional Article)Counters “contract splitting” avoidance wherelong-duration contracts are split into a series ofshorter contracts.Australia has adopted Article 14 but preserveexisting bilateral rules that deem a PE to existfor offshore natural resource activities.Article 15:Definition of a person“closely relatedto an enterprise”(Optional Article)Defines the term “person closely related”, in thecontext of Articles 12, 13, and 14 of the MLIAustralia has adopted Article 15 withoutreservation.

Mutual Agreement Procedure & ArbitrationTax Essentials Understanding the Multilateral Instrument (MLI)MLI ArticleBrief description of the ArticleAustralia’s final positionArticle 16:Mutual agreementprocedure (MAP)[Minimum standard]Provides that all CTAs will now include aminimum standard for MAPs. If a treaty-relatedcase qualifies to be considered under the MAP,upon the request of a taxpayer, the competentauthorities should endeavour to agree betweenthemselves how double tax agreements shouldapply, and implement any agreement. This willprovide taxpayers with a more effective taxtreaty-based dispute resolution procedure.Australia has adopted Article 16without reservationArticle 17:Correspondingadjustments(Optional Article)Requires jurisdictions to make appropriatecorresponding adjustments in transfer pricingcasesAustralia has adopted Article 17 buthas preserved existing correspondingbilateral rulesArticle 18-26:Mandatory bindingarbitration(Optional Article)Part VI of the MLI allows countries to adoptan Arbitration regime that allows taxpayersto request arbitration where a case has beensubject to a MAP for at least two years, withoutresolution. Two different types of decisionmaking processes are facilitated: “final ofer”approach (or ‘baseball’ arbitration) or the“independent opinion” approach.Australia has adopted independentand binding arbitration subject to thefollowing conditions: Disputes which have been the subject ofa decision by a court

Tax Essentials Understanding the Multilateral Instrument (MLI) 2 Under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), more than 125 countries are collaborating. The MLI is an outcome of BEPS Action 15 and is designed to swiftly implement the tax treaty-related measures aris