The mutual agreement procedure (MAGP) remains the most widely used and best used means of eliminating double taxation. For more than two decades, the OECD and the EU have had an interest in improving the efficiency of the exploitation of LDCs through various instruments. After BEPS, the incidence of double taxation increases and the number of LDCs continues to increase. There is a growing emphasis on improving dispute settlement techniques in order to eliminate double taxation more effectively. This article presents some functions of the instruments currently available. In addition, the European Arbitration Convention provides for a procedure for agreeing on the distribution of profits between affiliated undertakings and permanent establishments. If, within two years, Member States fail to agree on the elimination of double taxation, a specific arbitration procedure is required to eliminate double taxation. A MAGP may be invoked by taxpayers to enable one country, in agreement with the other country, to eliminate cases of double taxation resulting from the actions of the tax administration in the other country. Even when an arbitration procedure is sought, the EU review found that there may be many shortcomings in the system, including the delay or absence of the creation of the Advisory Committee and the lack of agreement on the appointment of the Chair of the Advisory Committee, which delays or prevents the process. Information necessary for the submission of a request for a cartel procedure under the EU Arbitration Convention The mutual agreement procedures mentioned here are administrative procedures based on the application between two countries. They protect the taxable person`s right to be taxed under a double taxation convention (DBA). A DBA is an agreement between two countries, which provides, inter alia, for the allocation of tax rights for cross-border income (e.g. B residence in one country and income in the other).
The legal basis for a mutual agreement procedure is the DBA concerned. Germany has concluded DTAs with more than 90 countries around the world. Most of these DTAs follow the OECD`s draft international agreement. The provisions on mutual agreement procedures are set out in Article 25 of the OECD Model Agreement. Recent SDRs often contain provisions requiring arbitration after unsuccessful settlement proceedings. Once the request has been received, the BZSt verifies that the conditions for the implementation of a mutual agreement procedure are met. The transnational part of a mutual agreement procedure shall only be implemented if the request is admissible and duly reasoned and if no satisfactory solution can be found in Germany. In the case of transfer pricing disputes, the taxable person may rely on a MAGP to resolve any double taxation resulting from a transfer pricing adjustment initiated by a country. Taxable persons facing a transfer pricing adjustment may apply to their country of residence to resolve any problems with the imposition of double taxation that may result from that transfer pricing adjustment. First, under the new rules of the OECD Multilateral Agreement, the country of residence should consider an appropriate adaptation if it considers that the adaptation is compatible with the arm`s length principle.
If the country of residence does not accept an appropriate adaptation, it can use POPs to solve this double taxation problem through treaties with the other country. The OECD publishes statistics on mutual agreement procedures in OECD member countries in the “MAGP statistics”. The memorandum contains detailed information on how cartel and arbitration proceedings are conducted in Germany. .