The OECD Mutual Agreement Procedure: Understanding the Dispute Resolution Mechanism
The Organization for Economic Cooperation and Development (OECD) is an international organization whose mission is to promote economic growth, prosperity, and sustainable development among its member countries. One of the tools the OECD has developed to achieve this mission is the Mutual Agreement Procedure (MAP).
The MAP is a dispute resolution mechanism that allows taxpayers to request assistance from the competent authorities of two or more countries to resolve disputes related to the application of tax treaties. In other words, if a taxpayer believes that they are being taxed in violation of a tax treaty, they can request the competent authorities of the countries involved to resolve the dispute through the MAP.
The MAP is available to taxpayers who are residents of one or more of the countries that have entered into a tax treaty. It is also available to non-resident taxpayers who have a taxable presence in one or more of the countries that have entered into a tax treaty.
The MAP is not a mandatory process, and taxpayers can choose to resolve their disputes through the courts or other means. However, the MAP is often preferred because it is confidential, cost-effective, and can provide a mutually agreed-upon solution to the dispute, which can help avoid double taxation and promote certainty for taxpayers.
The MAP process typically begins with a request by the taxpayer to the competent authority of the country where they are resident. The competent authority will then initiate consultations with the competent authority of the country or countries where the dispute arises. The competent authorities will work together to try to resolve the dispute through a mutual agreement.
If a mutual agreement is reached, the competent authorities will implement the agreement in their respective countries. If a mutual agreement cannot be reached, the competent authorities will issue a decision or determination, which will be binding on the taxpayer and the tax authorities of the countries involved.
It is important to note that the MAP is not a quick process, and the resolution of disputes can take several months or even years. However, the benefits of using the MAP can far outweigh the costs and time involved in resolving disputes through other means.
In conclusion, the OECD Mutual Agreement Procedure is an important tool for resolving disputes related to the application of tax treaties. It is a cost-effective, confidential, and mutually beneficial process that can help avoid double taxation and promote certainty for taxpayers. As such, taxpayers and tax professionals should consider the MAP as a viable dispute resolution option when facing tax disputes related to tax treaties.
