The 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 sentence of paragraph 2 of Article 25 in their tax treaties to ensure that domestic law time limits (1) do not prevent the implementation of competent authority mutual agreements and (2) do not thereby frustrate the objective of resolving cases of taxation not in accordance with the Convention.
TPG2022 Chapter IV paragraph 4.49
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 4.48Where 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 4.45Relief 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...
- TPG2022 Chapter IV paragraph 4.52Another time limit that must be considered is the three-year time limit within which a taxpayer must invoke the mutual agreement procedure under Article 25 of the OECD Model Tax Convention. The three-year period begins to run from the first notification of the...
- 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...
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...