Mutual Agreement Procedure (MAP) Guidance notes released by CBDT

Mutual Agreement Procedure (MAP) Guidance notes released by CBDT

Mutual Agreement Procedure (MAP)

The Double Taxation Avoidance Agreements (DTAAs or Tax Treaties) provide rules and mechanisms for allocation of taxing rights amongst the treaty partners; avoidance of economic and juridical double taxation; and resolution of taxation not in accordance with the treaty through the Mutual Agreement Procedure (MAP) under a MAP Article based on the provisions of Article 25 of the UN/OECD Model Tax Convention.

What is Mutual Agreement Procedure (MAP) ?

In other words, Mutual Agreement Procedure (MAP) is an alternate tax dispute resolution mechanism available to the taxpayers under the DTAAs for resolving disputes giving rise to double taxation or taxation not in accordance with DTAAs.

MAP enables the competent authority(ies) (CA) of India to engage with the CAsof other treaty partners and is a process which facilitates discussions and negotiations between both treaty partners as they endeavourto resolve international tax disputes, which are not in accordance with the relevant DTAAs.

Recently notified Rule 44G applicable w.e.f 6th May, 2020 substitutes provides, inter-alia, the processes to be followed by the CAs of India till the resolution of the issue of taxation not in accordance with the treaty and the processes to be followed by the field authorities to implement the outcome of the MAP.

At present, India has two CAs for MAP case.

A MAP request can be made by a taxpayer when it considers that the actions of the tax authorities of one or both of the treaty partners results or will result in taxation not in accordance with the relevant DTAA. The application has to be made in Form No. 34F in accordance with rule 44G.

If the CAs of both the countries involved are unable to resolve a MAP case, they would close the MAP case as unresolved. The CA of India having jurisdiction over the case shall inform the Indian taxpayer about the non-resolution of the dispute

The CBDT has issued the MAP guidance for the benefit of taxpayers, tax practitioners, tax authorities, and CAs and of treaty partners.

Though no time limit is prescribed but it shall be the endeavour of CAs to resolve MAP cases within an average time frame of 24 months.

The access to MAP shall be provided in respect of, inter-alia, the following types of cases/situations if they result in taxation not in accordance with the relevant DTAAs:

(a)Transfer Pricing adjustments;

(b)Determination of existence of a Permanent Establishment;

(c)Attribution of profits to Permanent Establishments, whether admitted or not by the taxpayer;

(d)Characterisation or re-characterisation of an item of expense or payment as a taxable expense or payment (like Royalty or Fee for Technical Services (FTS) or Interest); and

(e) Characterisation or re-characterisation of an item of receipt as a taxable income(like Royalty or Fee for Technical Services (FTS) or Interest).

India shall provide access to MAP even in a situation where the Indian tax authorities apply domestic anti-abuse provisions

The MAP guidance released by CBDT has been divided in the following four parts:

•Part A: Introduction and Basic Information;

•Part B: Access and Denial of Access to MAP;

•Part C: Technical Issues; and

•Part D: Implementation of MAP outcomes.

Download CBDT MAP guidance Click Here >>

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Mutual Agreement Procedure (MAP) Guidance Notes by CBDT