BEPS Action Plan: Action 14 – Dispute resolution mechanisms

The OECD’s goal in action 14 of the BEPS Action Plan — of making dispute resolution mechanisms more effective — should be readily welcomed by taxpayers. We provide commentary and links to content on how the additional impetus should help to bring mutual agreement procedure (MAP) issues to a head and provide more robust ways for issues to be resolved.

6 July 2017

The following extract from the BEPS Inclusive Framework's first progress report

to the G20 ahead of a meeting on 7-8 July 2017 (that report was also included in the OECD’s July 2017 report to the G20) provides a good overview of the reviews of minimum standards, including Action 14, as seen at the date of the report.

9 June 2017

Monitoring of the implementation of MAP recommendations has moved to its second tranche of countries…

which include Czech Republic, Denmark, Finland, Korea, Norway, Poland, Singapore and Spain.

Again taxpayers can submit input on specific issues relating to access to MAP, clarity and availability of MAP guidance and the timely implementation of MAP agreements for each of these jurisdictions using the taxpayer input questionnaire.


30 January 2017

Monitoring of the implementation of MAP recommendations has moved to its second tranche of countries …

which include Austria, France, Germany, Italy, Liechtenstein, Luxembourg and Sweden.

While the review will be carried out by the countries’ peers in the Inclusive Framework, taxpayers can submit input on specific issues relating to access to MAP, clarity and availability of MAP guidance and the timely implementation of MAP agreements for each of these jurisdictions using the taxpayer input questionnaire.


3 November 2016

In the last two weeks the OECD has released the terms of reference, methodology and schedule for reviews of countries’ MAP implementation …

as well as some additional guidance, largely in a ‘peer review document’ . Highlights include:

  • The reviews will be carried out by a countries’ peers in the Inclusive Framework on BEPS
  • There is an opportunity for taxpayers to participate via a taxpayer input questionnaire. The questionnaire is a simple Word document which can be downloaded with sections for access to MAP, clarity and availability of MAP guidance and implementation of MAP agreements.
  • The first reviews will take place between 1 January and 31 March 2017 and cover Belgium, Canada, the Netherlands, Switzerland, the UK and the US.
  • The 'schedule of reviews' provides details of the subsequent seven reviews for April/ August/ December of 2017 through to April 2019.
  • A MAP statistics reporting framework aims to ensure greater transparency on statistical information relating to the inventory, types and outcome of MAP cases through common reporting of MAP cases.

11 April 2016

Insofar as development of Terms of Reference and the Assessment Methodology for MAP monitoring were expected to be completed by the end of March 2016 …

the OECD is a little behind on this Action, though a delay only of a matter of weeks is expected.

Dealing with a wide group of stakeholders including the OECD’s Working Party (WP1) and the MAP Forum has apparently presented some challenges which needs to be dealt with including different levels of experience, staffing and cultural issues.

28 January 2016

We expect to see detailed reference terms shortly as the next step in this process and …

commentary has also been promised, some of which we expect to come from the OECD-led Forum on Tax Administration’s (FTA’s) MAP programme highlighted as one of the FTA’s priorities in its 2015-16 work programme. As we point out in our Tax Policy Bulletin of 28 January 2016, that will cover, for example, the MAP obligation, abuse and denial, reporting, and templates.

21 October 2015

According to the final report, countries will commit to develop a minimum standard and will ensure effective and efficient implementation of this standard…

This minimum standard is designed to ensure:

  • that treaty obligations relating to the mutual agreement procedure (“MAP”) are fully implemented in good faith and that MAP cases are resolved in a timely manner;
  • the implementation of administrative processes that promote the prevention and timely resolution of treaty-related disputes; and
  • that taxpayers can access MAP when eligible.

The report also recommends eleven best practices.  While not exhaustive, more notable examples of these best practices are set out below.

  • Advocating the inclusion of paragraph 2 of Article 9, and emphasizing that it would be more efficient if countries also had the ability to provide for corresponding adjustments unilaterally where they find the objection of the taxpayer to be justified.
  • Developing “global awareness” of the audit / examination functions involving international matters through the delivery of the FTA’s “Global Awareness Training Module.”
  • Publishing MAP guidance that explains the relationship between MAP and domestic law remedies, addressing in particular whether the competent authority considers itself to be legally bound to follow domestic legal decisions in MAP or whether the competent authority will not deviate from domestic legal decisions as matter of administrative policy or practice.
  • Allowing access to MAP in the case of bona fide taxpayer-initiated adjustments so that competent authorities can consult on and resolve the double taxation that may result.
  • Introducing appropriate measures to suspend the collection of tax during the MAP period.

Two documents – the “Terms of Reference” and the “Assessment Methodology” – will comprise the core documents for the peer monitoring process. It is expected that both of these core documents will be crafted jointly by the Working Party No. 1 and the FTA MAP Forum by the end of the first quarter in 2016.  The monitoring process, as conducted by the FTA MAP Forum, will begin in 2016, with reports made to the G20 through the OECD Committee on Fiscal Affairs (as early as end of 2017).

Further, twenty countries have committed to provide mandatory binding arbitration in their bilateral tax treaties as a means to guarantee that treaty-related disputes are resolved within a specified time frame.  This reflects a remarkable move forward as collectively these countries were involved in more than 90 percent of outstanding MAP cases at the end of 2013 (as most recently reported by the OECD).  That said, it remains concerning that a number of G20 countries have not committed to mandatory binding arbitration, and that the resultant pending inventory of MAP cases in these countries may continue to rise.

For more information, see our Tax Policy Bulletin/ Insights from Tax Controversy and Dispute Resolution of 21 October 2015

5 October 2015

We now have more details to add to the political commitment to better MAP dispute resolution in the form of…

a minimum standard to enable taxpayers to access improved cross-border tax dispute resolution on bilateral treaty matters and the specific procedural measures that will give effect to it.

Adding to the commitment to adequate resourcing, there is in particular a set of 11 best practices that cover things like training of dispute resolution staff, implementation of advance pricing agreements (APAs) and a number of items that should be included in countries’ published MAP guidance.

A monitoring process will be agreed in 2016 in conjunction with the Forum on Tax Administration.

Notwithstanding the minimum standard, a group of 20 states has also committed to a program of developing improved measures. This includes mandatory binding arbitration, which is likely to lead to a potentially broad coverage of open issues (e.g., according to the OECD it would cover something in the order of 90% of outstanding MAP cases).

Work is underway to enable the work in both these areas to be implemented under the multilateral instrument developed under Action 15.

19 December 2014

A discussion draft of 18 December acknowledges that the OECD should complement its actions to counter BEPS by improving the effectiveness of the mutual agreement procedure (MAP) but…views global consensus on mandatory binding arbitration as unlikely in the near term, so it proposes a three-pronged framework for improving MAP dispute resolution:

  • political commitments to effectively eliminate taxation not in accordance with the tax treaty in question
  • a monitoring mechanism (peer review by competent authorities) to ensure proper implementation of the political commitment
  • new measures to improve access to MAP and procedures.

Many tax authorities lack sufficient resources, and the MAP process can be lengthy, inefficient, and unpredictable. The BEPS initiatives and governments’ unilateral actions will undoubtedly place further strain on administrative processes. The draft proposes several administrative best practices, including (i) sufficient resources that are autonomous from tax audits and (ii) appropriate incentives to resolve cases.

The OECD seeks to implement four principles:

  • MAP-related treaty obligations are fully implemented in good faith. A revised Model Treaty Commentary would oblige competent authority ‘to seek to resolve’ cases in a ‘practical, fair and objective manner.’
  • Authorities promote prevention and resolution of treaty-related disputes.
  • Taxpayers can access MAP when eligible.
  • Cases are resolved once they are in MAP.

The OECD encourages the use of alternative dispute resolution options, such as bilateral Advance Pricing Agreements (APAs), which would proactively increase certainty and decrease the risk of double taxation. It is disappointing that the OECD has been unable to reach broad consensus on the need for mandatory binding arbitration.

10 September 2013

It’s to be hoped that the additional impetus provided by the Action Plan should help to bring MAP issues to a head and provide more robust ways …

for issues to be resolved. MAP has been a problem for some time with access to the process being denied to some taxpayers in some territories and failure to reach agreement not uncommon.

9 September 2013

The OECD’s goal here of making dispute resolution mechanisms more effective should be readily welcomed by taxpayers. The OECD has been …

focusing on making MAP more successful and, has been working with tax authorities to understand the problems. This is a matter on which business, through BIAC, has for some time been lobbying the OECD and the importance of the point is emphasised by the recent publication of OECD statistics which show a continued rise in unresolved disputes. They indicate that at the end of the 2012 reporting period, the total number of open MAP cases reported by OECD member countries was 4,061, a 5.8% increase as compared to the 2011 reporting period and a 72.7% increase as compared to the earliest available 2006 reporting period. This is at least partly due to the generally upward trend of new cases across the OECD as a whole during this period. The average cycle times for cases completed, closed or withdrawn actually decreased slightly in 2012 (23.20 months) as compared to 2011 (25.59 months) and when at its worst in 2010 (27.30 months), but is otherwise similar to what it has generally been in earlier years.

19 July 2013

Difficulties currently experienced in resolving bilateral treaty-related disputes between jurisdictions over taxing rights were highlighted…

 in discussions between the Business and Industry Advisory Committee to the OECD (BIAC) and tax authorities during the course of the initial BEPS discussion. Many, but not all bilateral treaties include a mutual agreement procedure (MAP) based on the OECD Model Treaty and in many cases it has worked well. But even where there is a MAP article in a bilateral treaty, it often requires only that the competent authorities  use their best efforts to reach agreement. Reasons for unresolved double taxation range from restrictions imposed by domestic law on the tax administration’s ability to compromise to stalemates on economic issues such as valuations.

The action, with a timeframe of two years, is to agree ways of resolving disputes where MAP does not work or is not applied. The OECD has looked at this issue previously, resulting for example in its Manual on Effective Mutual Agreement Procedures (MEMAP), so the issues are fairly well-known. The challenge remains to see whether jurisdictions can now be persuaded to do anything about them.

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Stef van Weeghel
Leader, Global Tax Policy & Administration Network
Tel: +31 (0) 88 792 6763

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