3 How MAP works
3.4. Analysis and evaluation by the competent authorities
Competent authorities customarily commence their evaluation of a MAP case upon receiving a detailed submission from the taxpayer. This is the beginning of the second stage of the MAP process, as outlined in the timeline in Annex 1. To encourage consistency and move forward in this stage of the process, competent authorities may wish to ensure that they are both dealing with the same information.
Since a misunderstanding of, or disagreement over, the facts of a case is one of the primary reasons for delays or disputes in MAP cases, a common understanding of the facts is vital to a smoothly running MAP case. If both competent authorities can agree upon the facts of a case, then a MAP case often comes down to international tax principles, policy concerns, and choosing an appropriate result upon which all stakeholders can agree.
Involvement of the taxpayer at this stage may be beneficial to both competent authorities for the purposes of clarifying any outstanding issues regarding the taxpayer’s particular situation, relationships, environment, etc. as outlined in Best Practice Nº13: Taxpayer presentations to competent authorities.
A competent authority’s view or position on an issue or transaction is the principal outcome of the analysis and evaluation of a case. In order for this position to be well founded and conveyed in a comprehensible manner, competent authorities should be prepared to explain in sufficient detail the nature of the adjustment and to a lesser extent the applicability of domestic law. Most important however, are the laws and principles that the two jurisdictions have in common, namely: the tax convention between the two contracting states; any commentary, technical explanations, or specific country guidance related to that convention; and finally published guidance by the OECD. All of these elements should be taken into account in the analysis and evaluation of an issue.
In many MAP cases the overriding principles that both competent authorities adhere to, beyond the applicable tax convention, are found in OECD guidance such as the OECD Model Tax Convention, including its Commentary, and the OECD Transfer Pricing Guidelines.