The Australian Taxation Office (ATO) has announced the publication of a joint administrative approach with New Zealand Inland Revenue (IR) on the application of the new treaty tie-breaker rule for non-individual taxpayers introduced by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ("Multilateral Instrument" or "MLI") that will swiftly implement a series of tax treaty measures to update international tax rules and lessen the opportunity for tax avoidance by multinational enterprises.
The rule for taxpayers was introduced by Article 4(1) of the Multilateral Convention that they who satisfy all of the eligibility criteria for the relevant year, the Australian Taxation Office (ATO) and New Zealand Inland Revenue (IR) jointly determine that:
This approach is designed to reduce the compliance burden and costs for lower materiality taxpayers as they are able to assess their eligibility based on readily available information. It also allows the ATO and IR to focus compliance resources on arrangements that could have material revenue consequences and/or pose higher risk of non-compliance with the tax laws. The approach indeed skips the process of MAP recommended by OECD to solve the dual tax residence case, which requires long process to reach the agreement.
The administrative approach will only be valid if the taxpayer satisfies all of the following conditions on an on-going basis:
Source: Australian Taxation Office
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