In international taxation, case mutual agreement procedure (MAP) refers to a process used to resolve disputes between two countries where double taxation arises from the application of their respective tax laws. The MAP is established under Article 25 of the OECD Model Tax Convention on Income and on Capital. The primary aim of the MAP is to eliminate or reduce double taxation resulting from the interpretation or application of a tax treaty.
The MAP can be initiated by taxpayers or a competent authority. A competent authority may be a tax authority of one of the treaty countries. The competent authority of one treaty country can request the competent authority of the other treaty country to enter into consultations to resolve the dispute. The consultation process is confidential, and the competent authorities are required to use their best efforts to reach an agreement within two years from the date of receipt of the request.
There are several benefits of using the MAP. Firstly, it provides taxpayers with a mechanism to resolve disputes arising from double taxation. This ensures that taxpayers do not pay more taxes than they should. Secondly, it helps to maintain positive relations between treaty countries by resolving disputes before they escalate into more significant issues. Finally, the MAP can provide clarity and certainty to taxpayers regarding the interpretation and application of tax laws, which can reduce compliance costs.
To initiate the MAP, a taxpayer must provide a request in writing to the competent authority of the treaty country in which the taxpayer is a resident. The request must contain information such as the nature of the case, the years at issue, the amounts involved, and the reasons why the taxpayer believes there is a double taxation issue. The taxpayer must provide supporting documentation, including copies of tax returns and assessments.
In conclusion, the case mutual agreement procedure is a mechanism used to resolve disputes arising from double taxation between treaty countries. It is a valuable tool for taxpayers, as it helps to reduce compliance costs and provides clarity and certainty regarding the interpretation and application of tax laws. The MAP is confidential and offers a way to resolve disputes before they escalate into more significant issues. If you are a taxpayer faced with a double taxation issue, consider initiating the MAP process to resolve the issue.