Article 25: Mutual Agreement Procedure
United Nations Model Double Taxation Convention between Developed and Developing Countries (2017 Update)
Article 25
Mutual Agreement Procedure (MAP)
Article 25 (alternative A)
Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention.
The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with this Convention. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.
The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.
The competent authorities of the Contracting States may communicate with each other directly, including through a joint commission consisting of themselves or their representatives, for the purpose of reaching an agreement in the sense of the preceding paragraphs. The competent authorities, through consultations, shall develop appropriate bilateral procedures, conditions, methods and techniques for the implementation of the mutual agreement procedure provided for in this article.
Article 25 (alternative B)
Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention.
The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with this Convention. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.
The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.
The competent authorities of the Contracting States may communicate with each other directly, including through a joint commission consisting of themselves or their representatives, for the purpose of reaching an agreement in the sense of the preceding paragraphs. The competent authorities, through consultations, may develop appropriate bilateral procedures, conditions, methods and techniques for the implementation of the mutual agreement procedure provided for in this Article.
Where,
(a) under paragraph 1, a person has presented a case to the competent authority of a Contracting State on the basis that the actions of one or both of the Contracting States have resulted for that person in taxation not in accordance with the provisions of this Convention, and
(b) the competent authorities are unable to reach an agreement to resolve that case pursuant to paragraph 2 within three years from the presentation of the case to the competent authority of the other Contracting State, any unresolved issues arising from the case shall be submitted to arbitration if either competent authority so requests. The person who has presented the case shall be notified of the request. These unresolved issues shall not, however, be submitted to arbitration if a decision on these issues has already been rendered by a court or administrative tribunal of either State. The arbitration decision shall be binding on both States and shall be implemented notwithstanding any time limits in the domestic laws of these States unless both competent authorities agree on a different solution within six months after the decision has been communicated to them or unless a person directly affected by the case does not accept the mutual agreement that implements the arbitration decision. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this paragraph.
OECD Model Tax Convention on Income and on Capital (2017 Update)
Article 25
Mutual Agreement Procedure
Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of either Contracting State. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention.
The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Convention. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.
The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.
The competent authorities of the Contracting States may communicate with each other directly, including through a joint commission consisting of themselves or their representatives, for the purpose of reaching an agreement in the sense of the preceding paragraphs.
Where,
a) under paragraph 1, a person has presented a case to the competent authority of a Contracting State on the basis that the actions of one or both of the Contracting States have resulted for that person in taxation not in accordance with the provisions of this Convention, and
b) the competent authorities are unable to reach an agreement to resolve that case pursuant to paragraph 2 within two years from the date when all the information required by the competent authorities in order to address the case has been provided to both competent authorities,
any unresolved issues arising from the case shall be submitted to arbitration if the person so requests in writing. These unresolved issues shall not, however, be submitted to arbitration if a decision on these issues has already been rendered by a court or administrative tribunal of either State. Unless a person directly affected by the case does not accept the mutual agreement that implements the arbitration decision, that decision shall be binding on both Contracting States and shall be implemented notwithstanding any time limits in the domestic laws of these States. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this paragraph.[1]
Mandatory Binding MAP Arbitration Provisions in Bilateral Tax Treaties
One of the outcomes of the OECD's BEPS Project is the commitment by some countries to include arbitration provisions in their existing tax treaties. Under this framework, unresolved disputes under the Mutual Agreement Procedure will be assigned to an arbitration panel to strengthen the effectiveness and efficiency of the MAP Process . See the OECD's Report here
Article 25 Bibliography
Bertolini, Michelle S & Pamela Q Weaver. “Mandatory Arbitration within Tax Treaties: A Need for a Coherent International Standard” (February 2012) 2012 American Taxation Association Midyear Meeting: JLTR Conference, online: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2003897>
Chaisse, Julien, "Investor-State Arbitration in International Tax Dispute Resolution: A Cut Above Dedicated Tax Dispute Resolution" (2016) 35 VA. TAX REV. 149
Dourado, Ana Paula and Pasquale Pistone (eds), ‘Some Critical Thoughts on the Introduction of Arbitration in Tax Treaties’ (2014) 42 Intertax 158 <https://www.kluwerlawonline.com/abstract.php?area=Journals&id=TAXI2014015>
Duff, David G. “Canada: Judicial Review of Taxpayer’s Request for Competent Authority Assistance under Canada-United States Tax Treaty” in Eric CCM Kemmeren et al, eds, Tax Treaty Case Law Around the Globe 2014 (Amsterdam: International Bureau of Fiscal Documentation, 2014) 85 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-Around-Globe-2014>
Garbarino, Carlo & Marina Lombardo. “Arbitration of Unresolved Issues in Mutual Agreement Cases: The New Paragraph 5, Art. 25 OECD Model Convention, a Multi-Tiered Dispute Resolution Clause” (2010) Bocconi Legal Studies Research Paper No 1628765, online: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1628765>
Hurtado, Hugo A. “Is Latin American Taxation Policy Appropriate for Promoting Foreign Direct Investment in the Region?” (2011) 31:2 Nw J Intl L & Bus 313, online: <https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjl1uvRr9_MAhUowYMKHfs6CkgQFgglMAE&url=https%3A%2F%2Fworks.bepress.com%2Fhugo_hurtado%2F1%2Fdownload%2F&usg=AFQjCNHO-bv5Vg13uT9dNrLnkfurIp-lsA&sig2=e5iJtmWfY4tVNAM9r-unwA>
Kollman, Jasmin et al. “Arbitration in International Tax Matters” (2015) 77:13 Tax Notes Intl 1189, online: <https://www.wu.ac.at/fileadmin/wu/d/i/taxlaw/institute/WU_Global_Tax_Policy_Center/Arbitration/Arb_in_int_tax_matters_Kollmann_Koch_Majdanska_Turcan.pdf>
Lombardo, Marion. “The Mutual Agreement Procedure (Art 25 OECD MC): A Tool to Overcome Interpretation Problems?” in Michael Schilcher & Patrick Weninger, eds, Fundamental Issues and Practical Problems in Tax Treaty Interpretation (Vienna: Linde, 2008) 457 <https://www.lindeverlag.at/buch/fundamental-issues-and-practical-problems-in-tax-treaty-interpretation-3253>
Rosenzweig, Adam H., "Thinking Outside the (Tax) Treaty" Revisited (2016) 41 Brook. J. INT'L L. 1229 <https://brooklynworks.brooklaw.edu/bjil/vol41/iss3/10/>
Sengputa, DP. “India: Is a Competent Authority Determination on the Existence of a PE in the Source State Determinative? – The Case of eFunds Inc” in Michael Lang et al, eds, Tax Treaty Case Law Around the Globe 2015 (Vienna: Linde, 2016) 353 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-around-Globe-2015>
Sidhu, Poonam Khaira ‘Is the Mutual Agreement Procedure Past its “Best-Before Date” and Does the Future of Tax Dispute Resolution Lie in Mediation and Arbitration?’ (2014) 68 Bull Intl Tax 11 <https://www.ibfd.org/IBFD-Products/Journal-Articles/Bulletin-for-International-Taxation/collections/bit/html/bit_2014_11_int_2.html>
Welty, Todd et al. “Preparing for a Tsunami of International Tax Disputes” (2015) 80:12 Tax Notes Intl 1047, online: <http://files.mwe.com/files/uploads/Documents/Pubs/80ti1047-Welty_Thomas_Gavioli_Lowell.pdf>
Züger, Mario. “Mutual Agreement and Arbitration Procedure” in Michael Lang et al, eds, Multilateral Tax Treaties: New Developments in International Tax Law (London: Kluwer Law International, 1998) 153 <https://www.bookdepository.com/Arbitration-Under-Tax-Treaties-Mario-Zuger/9789076078526>
Article 25 Cases
Canada v Canwest Mediaworks Inc, 2008 FCA 5.
Caron v The Queen,[1998] 3 CTC 2226 (TCC).
CGI Holdings v the Queen, 2016 FC 1086.
DIT v E-Funds Corporation Inc, [2014]-TII-05-HC-DEL-INTL] (Delhi High Court India).
Feigenbaum v The Queen,[2000] 2 CTC 2720 (TCC).
Herbert A Filler v Commissioner of Internal Revenue,27 May 1980, 74 TC 406 (United States).
Komet Inc and Konetehdas Oy Komet v Republic of Finland, 1 February 2002, 89 AFTR 2d (RIA) 2002-671 (United States).
Sundog Distributing Inc v The Queen, 2010 TCC 392.
Teletech Canada Inc v Minister of National Revenue, 2013 FC 572.
Xerox Corp v United States, 6 December 1994, 41 F3d 647 (United States).
Yamaha Motor Corp USA v United States (Internal Revenue Servie), 19 December 1991, 779 F Supp 610 (United States).