2 July 2025 • 6 minute read
UAE Ministry of Finance issues guidance on Mutual Agreement Procedure
Background
On 24 June 2025, the UAE Ministry of Finance (MOF) issued long-awaited guidance regarding the Mutual Agreement Procedure (MAP). The guidance clarifies eligibility, processes, timelines and documentation required for resolving international tax disputes under the UAE’s Double Tax Treaty (DTT) network.
MAP is a formal mechanism that allows taxpayers to seek relief when taxation by one or both treaty countries is not in accordance with the provisions of DTT. In addition, it enables the MOF, as the competent authority, to engage with authorities of other treaty states. While the MOF leads the MAP process, the Federal Tax Authority (FTA) is responsible for implementing adjustments agreed upon through MAP.
The UAE has over 100 DTTs in force, many of which include MAP provisions based on Article 25 of the OECD Model Tax Convention. These MAP provisions are introduced either through bilateral negotiations and updates of new or existing DTTs. In addition, the UAE’s commitment to the OECD’s Multilateral Instrument (MLI) further enhances its MAP framework by enabling automatic updates to DTTs with treaty partners that share aligned MLI positions.
Key stages of the MAP Process
- Determine eligibility: A taxpayer becomes eligible for MAP when they believe that taxation by one or both treaty countries is not in accordance with the provisions of DTT. This can arise in cases such as transfer pricing adjustments, dual residency, or permanent establishment profit allocations. The taxpayer must ensure the claim is filed within 3 years of the first notification of the action resulting in a tax dispute. The applicable DTT should be consulted to confirm the relevant time limit.
- Filing a MAP claim: The taxpayer submits a MAP request to the UAE MOF, including all relevant facts, documentation, and legal interpretations. Among others, the claim must include detailed information such as the relevant DTT articles, affected tax years, transaction details, and supporting evidence. Applications should be submitted in English or Arabic. If applicable, the taxpayer is encouraged to submit the same claim to both treaty countries’ authorities.
- Assessment of MAP claim: The MOF, in its capacity as the UAE competent authority, reviews the claim to determine if it is complete and justified. A response is typically provided within 2 months. If the claim is rejected, the taxpayer and the other competent authority are informed of the reasons.
- Resolution process: If the claim is accepted, the UAE may first attempt to resolve the issue unilaterally (Unilateral relief). If that’s not possible, MAP claim will enter the bilateral negotiations phase with the other competent authority. During bilateral negotiations, competent authorities of both states exchange position papers, while the taxpayer may be asked to provide input or clarification but is not directly involved in the negotiations.
- Outcome and implementation: If an agreement is reached, the taxpayer is notified and must accept or reject the outcome within one month. Acceptance requires withdrawal from any domestic legal remedies, and the FTA will implement the agreed adjustments, including refunds of overpaid tax or penalties where applicable. If no agreement is reached, the MAP case is closed, and the taxpayer may pursue domestic remedies through the Tax Dispute Resolution Committee or UAE judicial courts.
Typical cases where MAP can help
- Transfer Pricing Adjustments: If the UAE FTA adjusts a cross-border transaction and the foreign jurisdiction does not provide a corresponding deduction, the company faces double taxation. MAP can help eliminate double taxation either through a withdrawal or reduction of the UAE adjustment or a corresponding deduction abroad.
- Dual Residency: When a taxpayer is considered a resident in both the UAE and another country, MAP can help determine the correct residency status under the relevant DTT.
- Permanent Establishments: If profits attributed to a branch or permanent establishment are adjusted in either jurisdiction, MAP can help secure relief through foreign tax credits or adjustment in the other jurisdiction.
- Application of Anti-Abuse Provisions: If a taxpayer believes that the anti-abuse clause in a relevant DTT should apply, or that the application of the UAE’s General Anti-Abuse Rule (GAAR) under the Corporate Tax Law conflicts with the provisions of the DTT, they may request MAP. While the MAP does not interpret domestic legislation, it can assess whether the DTT has been applied appropriately and engage with the other contracting state’s competent authority to seek a resolution.
- Multilateral Transfer Pricing Disputes: When a multinational group implements a global transfer pricing model (e.g. profit split method), tax authorities in different countries may disagree on how profits should be allocated. This can result in double taxation across multiple states. In such cases, MAP can be initiated with two or more jurisdictions to resolve the issue.
The MAP is especially useful when a taxpayer anticipates or has received a tax adjustment that leads to double taxation, and prefers a cooperative, treaty-based resolution over litigation.
Timeline and practical considerations
While the OECD recommends resolving MAP cases within 24 months from the acceptance of the MAP claim, actual timelines depend on the complexity of the case and cooperation between jurisdictions.
MAP cannot be pursued simultaneously with domestic legal remedies. However, MAP claim can be filed while domestic options remain available, provided the taxpayer agrees to suspend them during the MAP process.
For multiyear MAP resolutions, taxpayers may request a consolidated approach if the facts and circumstances are consistent across all years. This helps streamline the process and reduce duplication, but each year must still meet the DTT’s time limits and documentation requirements.
If MAP negotiations do not lead to a resolution, some UAE DTTs permit unresolved issues to proceed to arbitration. This option is available if the DTT includes an arbitration clause, no court or tribunal decision has been issued, and the MAP time limit has expired without agreement of competent authorities.
Key takeaway
The UAE MAP offers a treaty-based solution for resolving international tax disputes that result in double taxation. It applies in cases such as transfer pricing adjustments, dual residency, permanent establishment profit allocation, and multilateral disputes. Taxpayers can also use MAP when anti-abuse rules, including the UAE’s GAAR, conflict with treaty provisions.
Claims must be submitted within the DTT’s time limits, and MAP cannot run in parallel with domestic legal remedies. Penalties and tax liabilities covered by a MAP agreement may be reduced or waived, provided the taxpayer accepts the outcome.