Guide To The Mutual Agreement Procedure Under Tax Treaties

Posted on Sep 22 2021 - 2:33am by Ed

There are clear and often long deadlines within which the MAGP can be requested. In particular, the second sentence of Article 16(1) of the MLI provides that the POP case must be brought within a specified period, that is to say, less than three years from the first declaration of the tax action, and not in accordance with the provisions of a classified tax convention. This means that taxable persons cannot submit their case within three years of the first notification of the appeal leading to taxation, in accordance with the provisions of the covered tax treaty. The first communication is generally considered to be the definitive taxation at the end of a tax application or similar. The Cartel Procedure (MAP) (also known as the Competent Authority Procedure (CAP)) is an administrative procedure intended to help resolve the difficulties arising from beps 14: the objective of BEPS 14 was to find solutions to remove obstacles preventing countries from tackling contractual disputes under the MAGP, including the absence of arbitration provisions in most treaties. and the fact that, in some cases, access to LDCs and arbitration may be denied. In its 2015 Final Report 14 entitled "Making dispute resolution mechanisms more effective" (final report), the OECD highlighted the fundamental importance of the POPs mechanism for the proper application and interpretation of tax treaties, the development of a minimum standard for the settlement of treaty disputes and a set of recommendations on good practices. Some may argue that the advantage of an arbitration procedure lies in the fact that the existence of this mechanism provides an incentive for Member States to settle disputes before the expiry of the two-year period, which would be a success rather than a failure of the convention. However, the statistics also show that 202 cases had exceeded the two-year period, although it had been cancelled with the agreement of the taxable person.

This indicates that taxable persons do not always consider the arbitration procedure available to them under the Convention as a desirable means of settling double taxation. Click here to read the full Deloitte/ITR guide to the transfer pricing controversy 2020 On 30 January 2019, the Russian Ministry of Finance published on its official website guidelines on mutual agreement procedure under double taxation agreements (the Guidelines). The guidelines contain recommendations on the initiation and implementation of mutual agreement procedures (LDCs) with the competent authorities of the Tax Treaty Partner States. The guidelines are presented in Russian and English and are a step in the implementation of the recommendations of Action 14 (Making Dispute Resolution Mechanisms More Effective) of the OECD`s BEPS2 plan1. The guidelines are divided into three parts: overall, it is clear that the MLI expands taxpayers` access, both by extending to three years the taxpayer`s time limit for initiating a POPs and by imposing on the competent authorities an effective period of two years to settle a case (after this period, it may be subject to arbitration). The MLI has led to greater uniformity of approach on certain key issues such as arbitration and, most importantly, to a single POP article for covered tax treaties. In August 2020, the Central Board of Direct Taxes (CBDT) published Guidelines on Mutual Agreement Procedure (MAP), which contains the following four parts: taking into account the MAP resolution, Part VI of the MLI (Articles 18 to 26 inclusive) deals with the mandatory reconciliation of POP cases. Several jurisdictions committed, at the time of the final report, to introducing mandatory POPs arbitration in their bilateral tax treaties.

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