Strategizing Multinational Tax Risks

As the OECD renews its efforts to improve the process of dispute resolution, many practitioners, tax authorities and advisors have concluded that the current Mutual Agreement Procedure (MAP) process is slow, inefficient and not effective in resolving tax disputes and avoiding double taxation.

However, it is worthwhile to start with a suggested timeline and Best Practices from OECD’s Manual on Effective Mutual Agreement Procedures (MEMAP) published in 2007.  Annex 1 and 2 provide a suggested timeline and 25 Best Practices (summarized below) that are each discussed in MEMAP.  

To the extent these Best Practices and recommendations have not been implemented by countries around the world, one questions what will be the difference this time around?  It seems that the OECD has tried to provide remedies, although many countries do not view these recommendations as a priority or transparency objective to resolve disputes effectively.  

While the effectiveness of dispute resolution mechanisms continue, it would be prudent to  provide the tax authorities, including competent authorities, this Manual as a reinforcement of Best Practices and timelines that should be proactively followed. 

A link to the Manual is provided for reference:

Click to access 38061910.pdf

Appendix 2: Best Practices:

1. Resolving and publishing issues of interpretation or application
2. Robust use of Article 25(3) power to relieve double taxation
3. Principled approach to resolution of cases
4. Transparency and simplicity of procedures for accessing and using the MAP
5. Providing complete, accurate, and timely information to the competent authorities
6. Allowing electronic submissions
7. Allowing early resolution of cases
8. Earlier notification of a potential case
9. Liberal interpretation of time limits and advising of treaty rights
10. Avoiding exclusion from MAP relief due to late adjustments or late notification
11. Consideration of MAP assistance for cases described as “tax avoidance”
12. Countries eliminate or minimize “exceptions” to MAP
13. Taxpayer presentations to competent authorities
14. Cooperation and transparency
15. Face-to-face meetings between competent authorities
16. Bilateral process improvements
17. Decision summaries
18. Recommendation for MAP cases beyond two years
19. Avoid blocking MAP access via audit settlements or unilateral APAs
20. Interest relief
21. Suspension of collections during MAP
22. Readily available access to a competent authority
23. Independence and resources of a competent authority
24. Performance indicators for the competent authority function and staff
25. Implementing and promoting ACAP and bilateral APA programs