Ireland has published guidelines for requesting Mutual Agreement Procedure (MAP) assistance.
The guidelines, issued in early August, set out the legal basis for requesting MAP assistance as well as:
- the process through which taxpayers can request assistance from Ireland's Competent Authority (the Revenue)
- the possible outcomes resulting from a request for MAP assistance and
- interaction with domestic remedies in Ireland.
Legal basis for requesting MAP assistance in Ireland
The legal basis for requesting MAP derives from bilateral tax treaty provisions (typically negotiated based on article 25 of the OECD Model Tax Convention) signed by Ireland. Under the new guidance for requesting MAP assistance, the Revenue has confirmed its commitment to resolving cases by mutual agreement with the competent authority of the other contracting state in accordance with the relevant tax treaty.
At present, taxpayers must approach the competent authority of the jurisdiction in which they are resident in order to request MAP assistance. However, Ireland has recently signed the Multilateral Instrument (MLI) as part of the OECD Base Erosion and Profit Shifting (BEPS) project. Once the instrument is ratified, taxpayers will be able to approach the competent authority of either jurisdiction to request MAP assistance under the relevant tax treaty.
Similarly, under article 6 of the EU Arbitration Convention (90/436/EEC), a taxpayer may present a MAP request to the Competent Authority when the taxpayer considers the principles of article 4 of the Convention have not been observed. In such cases, MAP requests should be submitted to the competent authorities of both jurisdictions simultaneously.
How to request MAP assistance
Under the new guidance, taxpayers are required to submit MAP requests in writing to the Revenue within three years from the first notification of the action that has purportedly resulted in taxation not in accordance with the treaty. However, it should be noted that not all tax treaties contain the same time limits and taxpayers should consult the relevant tax treaty to ensure submissions are within the specified notification period. The same three-year time limit applies for requests made under article 6(1) of the EU Arbitration Convention.
In broad terms, taxpayers are required to submit the following information to the Revenue in a MAP request made under a tax treaty or the EU Arbitration Convention:
- Identity of the taxpayers party to the relevant transaction(s)
- Details of the relationship between the taxpayer and relevant parties
- Legal basis for the request
- Facts and circumstances of the case
- An analysis of the issues involved
- Whether the issues presented in the MAP request have been dealt with previously in an advance ruling, APA, settlement agreement, tribunal or court.
The Revenue will consider the following in determining whether to accept a MAP request:
- Whether there is a treaty in place between Ireland and the foreign jurisdiction which contains the appropriate enabling provision and/or both countries are signatories to the EU Arbitration Convention
- Whether the actions of one or both countries result or may result in taxation not in accordance with the provisions of the treaty and/or the provisions of article 4 of the EU Arbitration Convention may not have been observed
- Whether the Competent Authority receives a valid MAP request within the time limit specified in the applicable treaty and/or the time limit specified in article 6 of the EU Arbitration Convention
- Whether the issue or objection raised by the taxpayer appears to be justified and well founded
Resolution of a MAP request
In line with Action 14 of the BEPS Action Plan, the Revenue is committed to resolving MAP cases with the competent authority of the relevant jurisdiction within 24 months, subject to the complexity of the case at hand, the cooperation of the taxpayer and the number of negotiation rounds required.
Where an agreement cannot be reached through the MAP process, the taxpayer will be notified within 30 days and will be given reasons setting out why an agreement could not be reached. From this point, taxpayers have the options to pursue either:
- domestic administrative or judicial remedies or
- arbitration under the relevant tax treaty (where available, for example in tax treaties with Canada, Israel, Mexico and the United States) or
- arbitration under the EU Arbitration Convention, where applicable.
The MLI arbitration provisions may also be applicable, depending on the tax treaty partner involved and it has ratified the MLI.
Interaction with domestic remedies available in Ireland
Taxpayers may request MAP assistance irrespective of the remedies provided by Ireland's domestic law. However, the Revenue cannot derogate from decisions made by Appeal Commissioners or the highest court in which the matter is heard. MAP can be pursued while judicial or administrative proceedings are still ongoing. In such cases, the Revenue may request that the taxpayer suspend proceedings pending the outcome of MAP, otherwise, the Revenue may delay the MAP process to await the outcome.
Taxpayers can also pursue domestic judicial or administrative remedies in Ireland if they reject the agreement reached by the Revenue and the tax treaty partner countries involved in the MAP process.
In this post-BEPS era, with tax authorities globally focused on auditing and challenging international transactions, MAPs are likely to become more effective as an alternative dispute resolution mechanism.
In this context, MAP provides a mechanism for taxpayers to seek relief in any situation where there is taxation not in accordance with the relevant treaty. Some examples of issues often taken to MAP include:
- Adjustments made by one country (for example in transfer pricing) that results in double taxation of income
- Determining beneficial ownership of income
- Assessment of capital gains tax
- Residency of a taxpayer
- Whether there is a permanent establishment (PE)
- Attribution of profit to a PE
- Classification of payments, such as interests, royalties or dividends
See our APA and MAP Country Guide for more information about MAP assistance.
Find out more about using MAP by contacting any of the authors.