3 How MAP works
3.6. Competent authority agreements
Competent authority agreements or resolutions are often case and time specific. They are not considered precedents for either the taxpayer or the tax administrations in regard to adjustments or issues relating to subsequent years or for competent authority discussions on the same issues for other taxpayers. In fact, the letters exchanged between competent authorities to resolve a case often state as much. This is because the competent authorities have reached an agreement that often takes into account the facts of the particular taxpayer, the differences in the provisions of the tax law in each country, as well as the effects of the economic indicators on the particular transactions at the relevant time. Any review or adjustments of subsequent years by a taxpayer or tax administration is best based upon the particular circumstances, facts and documentary evidence existing for those years.
In most cases, a taxpayer cannot accept the terms of an agreement for only some issues or taxation years involved, unless both competent authorities agree. This is due to the fact that the competent authorities commonly consider the original request by the taxpayer, which is usually multifaceted, in its entirety and often consider all aspects (issues and taxation years) involved at one time and as one case, and ultimately one outcome. Practical and pragmatic solutions to contentious MAP cases are regularly the result of compromise and concessions made by parties involved and therefore a holistic approach is routinely used.
As mentioned in the Section 3.8. What Happens When an Agreement is Reached?, if a taxpayer is not satisfied with the agreement arrived at by the competent authorities, the taxpayer may reject it. If this occurs, the competent authorities may consider the case closed and advise the taxpayer accordingly or they may reconsider any new, reasonable, alternative position proposed by the taxpayer at that time. Assuming a competent authority agreement has been rejected and a valid notice of objection or an appeal has been lodged under applicable domestic procedures, the taxpayer typically has the option to proceed through the appeals process and/or to court, if applicable. If the other redress mechanism (appeal or court decision) does not reverse the adjustment in its entirety, double taxation may remain.
In such cases, it would be appropriate for the competent authority to accept another request (or reconsider the original request) by the same taxpayer on this same issue and years to address any remaining double taxation. For the most part, competent authorities only present the case to the other competent authority for the latter to provide relief to the extent it believes is warranted and will not themselves consider the provision of relief on a second request. Taxpayers should be cautioned that both competent authorities may share the same view or policy that relief will not be provided on a second request when full relief was offered and rejected by the taxpayer on the initial MAP case.