Although map is often used to process transfer pricing adjustments, it can also be used to resolve double taxation resulting from permanent establishment, residence and withholding tax, among others. The GLP process generally resolves disputes in one of three ways: (1) by withdrawing the adjustment by the jurisdiction that claimed it; (2) by an appropriate exemption from double taxation (for example. B a deduction corresponding to a proposed increase in income) of the other jurisdiction; or (3) by a combination of withdrawal and correlative relief. The competent authorities have the power to resolve cases unilaterally through full withdrawal or appropriate redress without the participation of the other Contracting Party, and sometimes do so. However, most MAPs are decided by “mutual agreement” between the competent authorities as to the amounts to be cancelled and/or the amounts for which a corresponding discharge would be granted. Article map of the Indian Income Tax Convention is based on Article 25 of the OECD Model Convention. An application for a POPs may be submitted by a taxpayer if he or she considers that the actions of the tax authorities of one or both parties result or will result in taxation that is not in accordance with the relevant tax treaty. Through this procedure, the competent authorities of the Contracting States may resolve by mutual agreement any divergence or difficulty concerning the interpretation or application of tax treaties. Scope of the MAP.
The MAP is a procedure introduced by income tax treaties to alleviate double taxation on the basis of tax notices offered by one contractual territory leading to the taxation of income already taxed by the other contractual jurisdiction (i.e. double taxation). Most tax treaties contain articles of the MAGP that empower the competent authorities (the office responsible for contractual matters within the tax authority) to negotiate and implement mutual agreements that address double taxation. Although the basic purpose of all WFP items is the same, specific procedures may vary from contract to contract. The Mutual Agreement Procedure (“MAP”) is a useful dispute resolution mechanism for multinational enterprises facing transfer pricing or other valuations that result in double taxation, whether in the United States or abroad. In order to take full advantage of the MAP procedure, taxpayers should carefully observe the applicable procedures in order to maximise their chances of success. The cartographic article of India`s Double Taxation Convention (DTA) is largely based on Article 25 of the OECD Model Convention. In this way, the certifying authorities of the Contracting States may resolve by mutual agreement disputes or difficulties concerning the interpretation or application of the respective DTA. Although the MAGP is fundamental to the correct application and interpretation of DTAs, it has emerged in particular as a widely used mechanism for resolving transfer pricing (TP) disputes. The procedures for claiming the MAGP and implementing the Pop Decision to grant relief in the event of double taxation or to avoid double taxation are set out in Rule 44G of the 1962 Income Tax Code.
The main highlights regarding the submission of the MAP application are: In order to avoid unintended hardship of taxpayers while waiting for the MAP application and to effectively manage revenue collection, India has signed a Memorandum of Understanding with some countries to suspend tax collection. These include the United States, the United Kingdom, Denmark, Sweden and South Korea. In this context, the Guidelines specify that the fees that may be suspended are those arising from the dispute discussed in the MAGP. With respect to POPs cases with other countries, India`s domestic law regulates procedures related to the suspension of tax collection or the suspension of the application. This usually involves partial or full payment of the tax claim issued by the Indian tax authorities. The Central Board for Direct Taxes (CBDT) issued Guidelines for the Mutual Understanding Procedure (MAP) in August 2020, which include the following four parts: The BEPS Action 14 Report (Making Dispute Resolution Mechanisms More Effective) contains a commitment by jurisdictions to implement a minimum standard to ensure that they resolve contract-related disputes in a timely manner, effectively and efficiently. All members of the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) commit to implement the Action 14 minimum standard, which includes the timely and comprehensive reporting of cartographic statistics (mutual agreement procedure) in accordance with an agreed reporting framework. WFP statistics for 2020 will be presented in this new framework. They cover all members who joined the Inclusive Framework before 2021. The release of India`s Level 1 peer review report highlighted the continued recognition and importance of the need to achieve tax certainty for cross-border transactions for multinational enterprises. The amended RULES OF THE MAGP, as well as the Guidelines, provide much-needed information and clarification for taxpayers considering using POPs to resolve cross-border tax disputes.
1 A special concurrent appeal procedure (“SAP”) allows taxpayers to obtain review of the case by a complaints officer in an advisory capacity while continuing to pursue POPs. SAP is not affected by this rule. The report, which included a peer review of India, concluded that India as a whole met half of the elements of the Action 14 minimum standard. In addition, the report recommended improvements in some areas, including the commitment to issue comprehensive guidance on the Indian Mutual Agreement (AEM) procedure with information on India`s approach to key MAP issues and the corresponding expectations of the parties. In this context, the Indian Central Board of Direct Taxes (CBDT) issued a notice on May 6, 2020 to amend the MAP regulations.2 Accordingly, the CBDT issued a notice on May 7, 2020. Detailed August 2020 Guidelines (the Guidelines) to provide important information on various aspects of the Indian MAP program. The guidelines consist of four sections, including: (A) introduction and background information; (B) access to and denial of access to POPs; (C) technical problems; and (D) the implementation of the WFP process. In line with the amended WFP rules, the guidelines also underline India`s commitment to resolve WFP cases within 24 months. In general, the publication of these guidelines will be useful and will benefit taxpayers, tax authorities and competent authorities of India and the respective foreign jurisdictions. The guidelines reaffirm India`s commitment to making dispute settlement an effective and efficient process by reforming its POPs regime to address key areas of the report. Cases occurring before or after 1.
January 2016 or January 1 of the year of membership in the inclusive beps framework Each MAP case that is not a MAP case is considered a “different” MAP case. The guide provides that India`s certification authorities may deny access to map in certain situations, as shown below: With this bulletin, we inform multinational enterprises of national and international legislative and regulatory documents. Access to POPs is granted at the same time as national remedies. India grants access to POPs in the following cases and for the following issues if they result in double taxation that is not in line with the COMMISSION: (i) TP adjustments; (ii) the existence of a permanent establishment (PE); (iii) the allocation of profits to a PE; and (iv) the characterization or recharacterization of revenues or expenses such as fees/fees for technical services or interest. In particular, the guidelines provide explanations on access to POPs in the following circumstances: See the graph showing the cumulative evolution of the total wfp case burden since 2016. The main differences between the two categories are as follows: Action 14 of the OECD BEPS PROJECT, which sets minimum standards and a peer review process for POPs, calls on competent authorities to strive to close new cases of MAP with transfer pricing issues within an average of two years or less. However, this two-year target merely sets the standard for average completion times and generally does not require individual cases to be completed within a specific time frame. However, more and more contracts provide for binding arbitration if the competent authorities are unable to resolve a POPs issue after a certain period of time (usually two years from the agreed “effective date” of the WFP). The United States` current tax treaties with Canada, Germany, France, Belgium, Switzerland, Japan and Spain contain such arbitration provisions. An allocation/allowance case (hereinafter referred to as a “transfer pricing case”) is a MAP case in which the taxpayer`s MAP claim relates to one of the following: In addition, the Guide states that the competent appraising agent in India, following the MAP resolution and subsequent acceptance by the taxpayer, will copy such an order that makes the MAP resolution effective, as well as details of the amount / date of payment of taxes / Date of issue of the refund to the taxpayer, withdrawal of appeals filed by the tax authorities and any other relevant details. While the MAGP is important for the correct application and interpretation of tax treaties, it has become a widely used mechanism for resolving transfer pricing disputes. The “secondary adjustments” provisions apply from the Indian financial year beginning on 1 April 2016.
The main objective of these provisions is to ensure that the distribution of profits among associated companies is consistent with the primary TP adjustment. The above provisions also provide for a cancellation of the MAP to require an effective repatriation in cash of the difference in profit. .