Impact of the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting on the taxation of fiscally transparent entities under the Australia-UK Double Tax Agreement

This article examines the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) in relation to fiscally transparent entities; specifically limited partnerships which are taxed as flow-through entities in one jurisdiction but as companies in another. Focusing on the adoption positions of Australia and the UK, the article analyses how the MLI impacts the treatment of fiscally transparent entities under the Australia-UK Double Tax Agreement. To add practical perspective, the article further examines the Australian decision in Commissioner of Taxation v Resource Capital Fund III LP, which raises a number of important issues embodied in the MLI concerning the application of principles in the 1999 OECD Partnership Report and the mutual agreement procedure (MAP) for resolving treaty-related disputes in Article 25 of the OECD Model Tax Convention. Whilst acknowledging the immense achievement of the OECD and the ad hoc Group in securing international consensus in relation to the multifarious MLI, nevertheless the article concludes the MLI is unlikely to achieve its primary objective to improve predictability and certainty for governments and businesses notwithstanding the option of "mandatory binding arbitration".