Australia adopted Article 4, but not the rule that would allow both tax administrations to grant contractual benefits in the absence of such an agreement. The MLI amends tax treaties that are “covered tax agreements.” A covered tax treaty is an agreement to avoid double taxation, which is in effect between the parties to the LML and for which both parties have indicated that they wish to amend the agreement with the LML. Lists of notified tax treaties are available in the ILI sections at: oe.cd/mli.2 The MLI will not affect Canada`s tax treaties with the United States (which have not signed the MLI) and with Germany and Switzerland (with which Canada has announced bilateral negotiations). Other Canadian tax treaties not covered by the MLI are Equador, Guyana, Kyrgyzstan, Taiwan, Uzbekistan and Venezuela. The signatories listed 2,362 tax treaties that should be covered by the LML. More than 1,100 contracts were listed by the two signatory states. This means that these “coordinated” contracts will be modified by the MLI. Of course, the number of coordinated contracts will increase as new signatories join the MLI. Jurisdictions that sign the MLI must indicate which of their tax treaties they must apply and amend. Tax treaties covered by the IML are called “covered tax agreements” (ACC). Taxpayers can refer disputes by mutual agreement that have not been resolved to independent and binding arbitration if they meet different criteria. In fact, implementation will be complicated. The different wording of the tax treaties, the ratification process for LLLs, the comprehensive interim lists of reserves and notifications of each signatory, and the lists of contracts covered by each signatory make it difficult to apply tax treaties in practice.
The main treaty changes to be implemented under the MLI are the inclusion of a comprehensive anti-avoidance rule in secure tax treaties, called primary object review or TPP. Under the TPP, a contractual benefit may be denied if it is found that one of the main purposes of an agreement or transaction was to obtain that benefit, unless it is established that the granting of the benefit is consistent with the purpose and objectives of the relevant provisions of the contract. Other minimum standards to be implemented through the IMI include (i) an amended preamble stating that secure tax treaties aim to eliminate double taxation without creating opportunities for non-taxation or reduction of evasion or evasion taxation, and (ii) amended dispute resolution procedures, including the adoption of mandatory arbitrations.