Transfer pricing

3 How MAP - 3.2 Acceptability of a MAP request - 3.2.1


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3 How MAP works

3.2. Acceptability of a MAP request

3.2.1. Time limits for requesting access to MAP

Tax conventions frequently include one or more time limits relevant to MAP requests.  One type of limit is that found in Article 25(1) of the OECD Model Tax Convention.  It provides that a case of taxation “not in accordance with the Convention” must be “presented” to the competent authority of the taxpayer’s residence country “within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention”.  For most tax administrations this generally means three years from the date of the notice of adjustment.  (Further guidance on the starting point of the three year time limit in the OECD Model Tax Convention is available in the Commentary to Article 25.)  However, there are many variations of time limits in various countries' treaty networks and therefore it would be prudent to verify the specifics for any one particular case.  If the taxpayer does not meet this timeliness requirement for presenting its case to the competent authority, it may be denied access to the MAP.

Best Practice Nº8:   Earlier notification of a potential case

It is advisable for taxpayers to consider filing a MAP request and/or notifying the appropriate competent authorities of a potential MAP case as soon as it appears likely that an issue will result in taxation contrary to the applicable convention.  This is the point when it becomes evident that there is a probability, and not just the possibility, that taxation not in accordance with the applicable convention will result (see Sections 2.1.1 Typical scenarios requiring competent authority assistance, and 2.2 How to Make a Request for Competent Authority Assistance).

Notifying or presenting a case in advance of a formal action giving rise to inappropriate taxation will help to ensure a convention’s time limits for requesting MAP or notifying competent authorities are met. 

The general purpose of time limits within a convention is to prevent tax administrations from having to make or react to adjustments many years after the taxable period at issue.  Such late consideration of adjustments may be difficult since the information may very well be stale or no longer available.  Records, information, and details regarding an issue or transaction may be very difficult to come by, especially in the case of a country that is unaware of the issue until long after the taxable period at issue.

Best Practice Nº9:  Liberal interpretation of time limits for requesting access to MAP

Balancing a tax administration’s need for reasonable time limitations with the necessity of providing MAP assistance to those entitled to treaty benefits can be a difficult issue.  Keeping in mind the spirit and objectives of the convention, however, taxpayers should not be unduly prevented from obtaining assistance via MAP due to overly strict interpretations of a convention’s time limitation for requesting MAP.  Simply put, taxpayers should receive the benefit of the doubt in borderline cases.

While the onus for making a timely request in order to preserve access to the MAP may rest with the taxpayer and taxpayers should take all reasonable steps to ensure that time limits do not expire, it would be helpful for a tax administration making an adjustment to advise the taxpayer of their rights under the applicable convention, including information about any time limitations in the convention for initiating MAP.  This written notice or advice could be included at the time of formal notification of a proposed adjustment and could include general guidance on the availability of MAP and how to go about protecting the availability of access to this mechanism.  Some administrations have implemented this best practice of advising taxpayers of both their domestic and convention rights and obligations at the time of the proposed adjustment, with successful feedback and results. 

Domestic law provisions, including time limitations, should not be an impediment to access to the MAP unless they are reflected in the terms of the convention itself.  A competent authority relying upon a domestic law impediment as the reason for not allowing a taxpayer to initiate MAP should inform the other competent authority of this and duly explain the legal basis of its position.  See Section 4. MAP AND DOMESTIC LAW for further guidance on the interaction of domestic law and the MAP process.  


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