4. MAP and domestic law
4.1. Interaction between MAP and domestic recourse provisions
With respect to adjustments or actions by a tax administration, it is advisable for taxpayers to protect, for greater certainty, their rights of domestic appeal or redress and they should take note of the domestic processes for doing so. Although in most cases the competent authorities reach agreement and relieve taxation not in accordance with the tax convention, there is no further recourse when a MAP agreement cannot be reached using all of the available mechanisms or programs of MAP (including possible avenues in MAP such as mediation, arbitration, advance pricing arrangements, etc., if available) if domestic rights have not been protected.
In most cases, tax administrations prefer to deal with an issue either via MAP or domestic recourse, but not both at the same time (with the exception of some countries offering a simultaneous MAP and domestic recourse program) to avoid duplication of effort. Therefore depending upon which process is chosen, it is recommended that the other process be held in abeyance pending the outcome of the first, taking into consideration the consequences of doing so in each jurisdiction.
Choosing domestic recourse such as court proceedings over MAP may in some jurisdiction result in a tax administration’s being bound by the decision of the court and prevented from providing relief through MAP. Where a competent authority takes the position that it cannot, or will not, deviate from domestic court decisions in MAP, it should make this position public and duly explain the legal basis of its position.
Notwithstanding the above, a taxpayer may in many instances make a competent authority request regarding one issue of an adjustment, and independently pursue another separate issue with domestic recourse.
Competent authorities are not bound by a decision given by a foreign court or a foreign appeal settlement. The granting of any relief to a taxpayer by a competent authority in such situations will depend more on the merits of the case rather than on another country’s inability to provide relief. Therefore, a country refusing access to, or relief via, MAP cannot genuinely expect the other country to provide unilateral relief for that reason alone.
The Commentary (with proposed revisions) to the OECD Model Tax Convention provides for further guidance on the interaction of MAP and domestic recourse provisions.