Academic journal article Journal of Legal, Ethical and Regulatory Issues

Taxpayers' Rights in Mutual Agreement Procedure on the Basis of Double Taxation Treaties and the Brics Countries

Academic journal article Journal of Legal, Ethical and Regulatory Issues

Taxpayers' Rights in Mutual Agreement Procedure on the Basis of Double Taxation Treaties and the Brics Countries

Article excerpt


As it is stated by Lombardo, mutual agreement procedure (MAP) should be understood as

"A special procedure outside domestic law aimed at representing the dispute on an amicable basis",

I.e. by the agreement between the competent authorities of the contracting states in cases where tax has been charged, or is going to be charged, not in accordance with the provisions of the double taxation treaty concluded between such states (Lombardo, 2008). Its potential allows contracting states to strengthen tax certainty that is mentioned by the G20 Leaders as one of the areas of their common efforts in an attempt to promote investment and trade in Hangzhou Communique adopted in September 2016 (para. 19) (G20 Information Centre, 2016).

The statistics of MAPs demonstrates the obvious fact that its importance continues to grow among developing and developed states in the context of the post-BEPS era including five BRICS states: Brazil had 13 MAP cases at the beginning of 2017 and 19-at the end of the same year, China-111 and 131 respectively, India-725 and 763, Russia-7 and 14 and South Africa-26 and 28 (OECD, 2018). It should be admitted that the MAP is

"The first and most used treaty-based form of international tax dispute resolution" (Christians, 2012).

The absence of effective MAP mechanism deprives the taxpayers of contracting states of opportunities for resolving tax treaty disputes that might lead to double taxation. At the same time, it is worth mentioning that the existence of MAP mechanism is undesirable without clear definition of the content of taxpayers' rights because does not create the conditions for trust as well as confidence between taxpayers and competent authorities. Based on this need, the list of positive taxpayers' rights concerning MAP might be desirable as an additional step in setting the balance between the interests of taxpayers and competent authorities.


The provisions on MAP are implemented in Art. 25 of the OECD Model Tax Convention (OECD MTC) that is widely recognized as constituting element of so-called "international tax language" (Vogel, 1997). Thus, the appearance of the OECD MTC is mentioned by R. Williams as

"The beginning of a new era in international taxation" because it was accepted "as a pattern on which bilateral tax conventions might thereafter be shaped" (Williams, 2014).

Obviously, the inclusion of Art. 25 has determined the presence of the provisions on MAP in the largest part of modern double taxation treaties.

The above mentioned article consists of five paragraphs.

The first two paragraphs formulate the obligation of the competent authorities to cooperate in an attempt to endeavor by mutual agreement to resolve the situation of taxpayers where they are subjected to taxation not in accordance with the provisions of double taxation treaty. The third paragraph gives the competent authorities the opportunity to resolve by mutual agreement problems that might arise in the process of interpretation or application of the provisions of double taxation treaty. Besides, it also authorizes the competent authorities to consult together for the elimination of double taxation in cases not provided for in the provisions of double taxation treaty. The fourth paragraph is dedicated to the issue of forms of interaction between competent authorities in the process of MAP and states that they may communicate with each other directly, including through a joint commission consisting of themselves or their representatives. The fifth paragraph provides a mechanism aimed at the arbitration of unresolved issues that hamper reaching a mutual agreement between competent authorities within two years. Such mechanism is activated by sending a request from the affected taxpayer.

It is worth mentioning that the potential of mandatory arbitration is rarely used by developing countries and the BRICS countries are not an exception in this case. …

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