Relief under paragraph 2 of Article 9 may be unavailable if the time limit provided by treaty or domestic law for making corresponding adjustments has expired. Paragraph 2 of Article 9 does not specify whether there should be a time limit after which corresponding adjustments should not be made. Some countries prefer an open-ended approach so that double taxation may be mitigated. Other countries consider the open-ended approach to be unreasonable for administrative purposes. Thus, relief may depend on whether the applicable treaty overrides domestic time limitations, establishes other time limits, or links the implementation of relief to the time limits prescribed by domestic law.
TPG2022 Chapter IV paragraph 4.45
Category: C. Corresponding adjustments and the mutual agreement procedure: Article 9 and 25 of the OECD MTC | Tag: Corresponding adjustment, Mutual agreement procedure (MAP), Statute of limitations, Time limits
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- TPG2022 Chapter IV paragraph 4.49The work on Action 14 of the BEPS Action Plan directly addresses the obstacle that domestic law time limits may present to effective mutual agreement procedures. Element 3.3 of the Action 14 minimum standard includes a recommendation that countries should include the second...
- TPG2022 Chapter IV paragraph 4.48Where a bilateral treaty does not override domestic time limits for the purposes of the mutual agreement procedure, tax administrations should be ready to initiate discussions quickly upon the taxpayer’s request, well before the expiration of any time limits that would preclude the...
- TPG2022 Chapter IV paragraph 4.47Paragraph 2 of Article 25 of the OECD Model Tax Convention addresses the time limit issue by requiring that any agreement reached by the competent authorities pursuant to the mutual agreement procedure shall be implemented notwithstanding the time limits in the domestic law...
- TPG2022 Chapter IV paragraph 4.46Time limits for finalising a taxpayer’s tax liability are necessary to provide certainty for taxpayers and tax administrations. In a transfer pricing case a country may under its domestic law be legally unable to make a corresponding adjustment if the time has expired...
- TPG2022 Chapter IV paragraph 4.51While it is not possible to recommend generally a time limit on initial assessments, tax administrations are encouraged to make these assessments within their own domestic time limits without extension. If the complexity of the case or lack of cooperation from the taxpayer...
- TPG2022 Chapter IV paragraph 4.50Where a country cannot include the second sentence of paragraph 2 of Article 25 in its tax treaties, element 3.3 of the Action 14 minimum standard states that it should be willing to accept an alternative treaty provision that limits the time during...
Related Case Law
- Denmark vs “Fashion Seller A/S”, November 2021, High Court, Case No SKM2021.582.OLRIn order to avoid double taxation, “Fashion Distributor A/S” had requested the Danish Tax Authorities, in parallel to the review of a transfer pricing assessment, to conduct a mutual agreement procedure under Article 6 of the EC Arbitration Convention 1990. The Danish Tax...