Oracle case marks shift in cross-border tax disputes, experts say

On Tuesday (21 October), the Full Federal Court handed down its decision in Oracle Corporation Australia Pty Ltd v Commissioner of Taxation, granting the taxpayer’s appeal to stay its domestic proceedings while the matter proceeded under the Australia–Ireland mutual agreement procedure (MAP).

The dispute concerned whether distribution payments made from Oracle Australia to Oracle Ireland should be classified as royalties. This classification would impact how they would be taxed under a treaty between Australia and Ireland to eliminate double taxation

Angelina Lagana, partner and head of tax controversy at Corrs Chambers Westgarth, said the decision had preserved taxpayers’ ability to choose how they pursue cross-border tax disputes.

“From a process perspective, whilst taxpayers are not free to pursue MAP and domestic litigation simultaneously, the choice of remedy generally remains with the taxpayer,” Lagana told Accounting Times.

“The decision is significant as it preserves taxpayer choice and signals that a stay will often be appropriate to allow MAP to run where domestic timelines necessitate filing.”

In a practical sense, Lagana said the case had supported the position that MAP was a genuine dispute resolution mechanism available to taxpayers under Australian tax treaties.

“Within the international tax system, MAP can assist taxpayers to address double taxation and resolve international tax disputes,” she said.

“There are pros and cons to MAP versus domestic proceedings that taxpayers must carefully consider when making decisions on how to progress with resolution of a dispute.”

Lagana welcomed the court’s decision as a “sensible outcome" in a recent case update. She said it aligned with international treaty frameworks, which permitted taxpayers to invoke MAP irrespective of the remedies provided by the domestic law.

Nitin Saby, former ATO director and current freelance special tax counsel, said that this outcome had strengthened firms’ ability to use MAP to resolve transfer pricing and double-taxation disputes, confirming multinationals’ ability to rely on treaty relief before fighting tax cases domestically.

He added that the case could lead to an uptick in MAP filings, especially in complex transfer pricing cases.

“This judgment elevates the Mutual Agreement Procedure (MAP) from a secondary option to the primary and strategically superior forum for resolving international tax issues,” Saby said.

“Clients can now confidently initiate the MAP process to resolve double taxation disputes, knowing the Australian courts will typically pause any domestic litigation until the MAP is complete. This puts your client, not the ATO, in control of the dispute's sequencing.”