3 How MAP works
3.1. The basics
Where a request is made to a competent authority under the MAP article of a tax convention, the competent authority should first, if the request appears to be justified, attempt to resolve the matter unilaterally.
For example, in a case involving a taxpayer assertion that the action of one or both contacting states results in taxation contrary to the convention, if the competent authority considers that the request for relief is justified and this relief is within the bounds of the tax convention, it could provide the relief without consulting the other competent authority. If the competent authority is not able itself to arrive at a satisfactory solution, it will engage the other competent authority and endeavour to resolve the matter by mutual agreement.
Once notified of a case, the competent authorities discuss the merits (and in some cases deficiencies) of the case or issue usually based upon a position developed by one of the competent authorities. These discussions can take place via correspondence, telephone, videoconference, or in person. Typically after a thorough discussion, which may involve a formal rebuttal to a position paper, the competent authorities in most cases come to an agreement on a mutually acceptable resolution of the case.
In double taxation cases, the agreement between competent authorities will outline to what extent each jurisdiction will provide relief and how the relief will be provided. Details such as method of relief (e.g. adjustment to income, credit, exemption, etc.), repatriation, and timing are usually recorded as a summary record followed by an exchange of letters between the competent authorities, which formalizes the agreement.
In such cases, if the other competent authority (the competent authority in the jurisdiction where the issue or adjustment did not arise) agrees to provide all or some correlative relief, then in most cases the relief is provided through a “corresponding adjustment”. The term “corresponding adjustment” is used to describe an adjustment made by a treaty partner in order to relieve double taxation caused by an adjustment initiated by the first mentioned tax administration.
Once the agreement between the competent authorities has been finalized, the taxpayer is notified in writing of the decision and is provided with an explanation of the result. Upon the acceptance by the taxpayer, written confirmation of the agreement is exchanged between the administrations and provided to the taxpayer. Soon afterwards the results are processed by the tax administration and relief is obtained.