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By Jaisal Baath, BBA LL.B. (Hons) | Jul 06, 2021


In the 21st Century, cross border business is the highest it’s ever been and as such, disputes relating to which jurisdiction will have the taxing right on the cross border transactions being performed are also on the rise. The BEPS Action 14 Minimum Standard aims to improve the resolution of tax related disputes between jurisdictions. Article 25 of the OECD Model Tax Convention brings about a Mutual Agreement Procedure (MAP) mechanism using which, the taxing authorities of the contracting states can resolve treaty disputes concerning the interpretation or application of the treaty by agreement[1].

The main aim of the BEPS Action 14 is to ensure a timely, efficient and effective operation of MAP by addressing the obstacles that hinder the operation of MAP. The OECD is of the view that peer reviews and continuous monitoring will help in ensuring that the final resolution delivered will be more transparent and effective.

BEPS Action 14: Aims and Objectives

The BEPS Action 14 is two-fold. The first sets out the minimum standards, monitoring processes and best practice which are to be followed in order to ensure optimal resolution of treaty disputes. To satisfy the first aspect of Action 14, the member countries must strive to ensure that:

  1. treaty obligations relating to MAP are implemented in good faith and to ensure that the disputes relating to MAP are resolved in a timely manner;
  2. putting in place administrative processes so as to ensure the timely resolution and prevention of disputes;
  3. taxpayers should have the ability to access the MAP to resolve disputes when eligible.

The second fold is the introduction of mandatory binding arbitration of disputes which remain unresolved[2]. This provision for the introduction of a binding arbitration in certain cases is also provided for under the “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI)”[3]. In relation to this provision, the OECD and G20 countries are yet to reach a consensus for its implementation. However, the US is among the 20 countries who are in favour of mandatory binding arbitration and these 20 countries together account for approximately 90% of the outstanding MAP cases, as at the end of 2013[4].

The 20th October 2016 OECD Publication has several parts. The Terms of Reference has translated the Action 14 minimum standards into 21 elements which helps in analysing a countries administrative and legal MAP frameworks and helps in analysing the effectiveness of the MAP provisions being implemented by the country. These 21 elements assess the countries on the basis of 4 (four) key areas:

  1. preventing disputes which consists of 2 elements;
  2. availability and access to MAP which consists of 10 elements;
  3. resolution of MAP cases which consists of 6 elements;
  4. implementation of MAP agreements which consists of 3 elements[5].

Furthermore, an assessment methodology was also enacted that provides for the procedures and guidelines to be followed for the peer review process which comprises of a 2 (two) stage process.

Under stage 1, jurisdictions’ implementation of the Action 14 Minimum Standard is reviewed on the basis of the legal and administrative framework of their MAP programmes and the application of this framework in practice, as well input from peers and taxpayers and reported MAP statistics[6]. For countries that have not implemented all of the 21 elements, recommendations are made so as to ensure, the Countries are able to meet all 21 elements. Follow-up on the stage 1 recommendations is reviewed in stage 2 of the process, which is initiated within one year after the approval of a jurisdiction’s stage 1 peer review report by the BEPS Inclusive Framework[7].

The OECD Consultation on the BEPS Action 14 (MAP)

The Public Consultation undertaken has provided the member countries with various suggestions so as to ensure the strengthening of the Minimum Standard. The following are the proposals introduced:

Proposal 1: Increase the use of Bilateral APAs:

 An Advance Pricing Agreement (APA) is an agreement between the taxing authority and the tax payer with a view to determining the transfer pricing methodology so as to identify the pricing for the tax payers international transactions for the future. It is recommended that member countries establish bilateral APA programme so as to ensure the prevention of disputes and to provide the tax-payers with certainty.

The peer review process has indicated that a majority of the member countries which were assessed had some form of a bilateral APA programme in place. The countries with a low MAP case burden can forego this recommendation of enacting bilateral APA programmes till the time the countries MAP burden reaches a certain level[8].

Proposal 2: Expand access to training on international tax issues for auditors and examination personnel:

As stated before, the aim of the BEPS Action 14 is to make the dispute resolution mechanisms as effective as possible. Even-though, the OECD lays importance on the existence of an effective MAP policy to realise this aim, not all cases have to enter the MAP process. Mandatory training for audit/examination personnel would increase auditors’ efficacy and would result in[9]:

  • better-trained auditors and examiners and
  • (ii) fewer adjustments that lead to long discussions in MAP or situations where the case is closed by providing unilateral relief in the jurisdiction that made the adjustment at issue.

This in turn can have the effect of reducing the overall number of MAP cases being initiated every year.

Proposal 3: Define criteria to ensure that access to MAP is granted in eligible cases and introduce standardised documentation requirements for MAP requests:

There are currently no commonly agreed criteria specifying when exactly a case will be eligible to be instated under the MAP process, as well as what information and documentation the tax payer is supposed to file in order to initiate the MAP process. Action 14 Minimum Standard defines the situations in which MAP should be given such as:

  1. transfer pricing cases;
  2. cases concerning the application of treaty and domestic anti-abuse provisions;
  3. cases in which there has been an audit settlement, and
  4. cases in which taxpayers have provided in the MAP request the required information and documentation as set out in a jurisdiction’s MAP guidance[10].

The peer review process identified that there are certain instances in which the MAP process is denied when it should have been allowed and vice versa. A few of such situations are as follows:

  1. cases in which there was no double taxation;
  2. cases in which there was already a final court decision but correlative relief might be obtained, and
  3. cases where a PE no longer existed at the time the MAP request was submitted[11].

Due to the above stated reasons, it is submitted that there is a need to adopt a standard for deciding which cases warrant a MAP process and which don’t. At the same time, to make the access to MAP easier for the tax payer as well as to ensure that no tax payer wanting to opt for MAP is wrongly denied access.

Proposal 4: Suspend tax collection for the duration of the MAP process under the same conditions as are available under domestic rules:

The MAP process usually lasts for a very long time, during the pendency of which, the jurisdictions laying claim to the taxable income, should put their call for the payment of the disputed income on hold, till the time the process of MAP comes to a final conclusion and the award is made in favour of one of the interested parties. This is done to ensure that their is no financial hardship on the tax payer during the pendency of the suit as by being forced by both the   jurisdictions to pay their respective alleged claims pertaining to the taxable income, a case of double taxation is born which financially frustrates the tax payer and defeats the purpose of opting for the MAP process in the first place. This requirement for the suspension of the claims being made by both the jurisdictions is in line with the domestic laws of most jurisdictions, under which a suspension of tax collection is available when domestic remedies are initiated to challenge the tax assessment[12].

Proposal 5: Align interest charges / penalties in proportion to the outcome of the MAP process:

Proposal 5 also follows the same line of reasoning as Proposal 4. The penalties and interest charges that are levied against a tax payer can be substantially high and in some cases can also be more than the taxes actually under dispute. This is highly biased against the tax payer as if after the final decision of the MAP process, the adjustment that made the basis for the interest being levied stands reversed, the tax payer can legitimately ask as to why is he still supposed to pay the interest even when the tax adjustment stands reversed as part of the MAP agreement. Currently, Jurisdictions don’t have to align such interests in line with the final outcome of the MAP process and this can result in significant financial hardships on the tax payer. This can effectively constitute as a roadblock in the effective function of the MAP process as tax payers maybe discouraged from going for MAP.

Proposal 6: Introduce a proper legal framework to ensure the implementation of all MAP agreements:

The peer review process shows that domestic time limits in approximately one-third of the reviewed jurisdictions may jeopardize the implementation of MAP agreements, in cases where the applicable tax treaty does not contain the equivalent of Article 25(2), second sentence, of the OECD Model Tax Convention (which ensures that MAP agreements can be implemented notwithstanding domestic time limits)[13].  In a number of jurisdictions assessed, the MAP process is still not fully implemented due to either the jurisdictions not being able to implement the MAP agreement or due to the tax payer not being able to initiate a MAP process due to the expiration of the domestic timelines.

As such, there are several options to address the risk of non-implementation, amongst which the following three introducing the obligation for jurisdictions that:

  1. All of their tax treaties contain the equivalent of Article 25(2), second sentence;
  2. All of their tax treaties contain the equivalent of Article 25(2), second sentence, supplemented, if requested by one State, with a provision limiting the time during which a primary adjustment or an assessment is made; or
  3. Their domestic legislation includes a mechanism that fiscal years are kept open until the MAP proceedings have been finalised or they have administrative procedures that allow for implementation notwithstanding domestic time limits for at least as long as not all treaties contain the equivalent of Article 25(2), second sentence[14].

Proposal 7: Allow multi-year resolution through MAP of recurring issues with respect to filed tax years:

In cases where the MAP process being initiated is exactly similar to a MAP process that has already been decided upon before, provided the facts and circumstances of both the MAP processes is the same, the tax payer should be allowed to rely on the the decision arrived in the similar MAP process already decided. While doing this, the authorities should make sure that the facts and circumstances of the two MAP processes is the same and as such a multi-year resolution through the MAP process should be allowed. This may help to avoid duplicative MAP requests and permit a more efficient use of competent authority resources[15].

Proposal 8: Implement MAP arbitration or other dispute resolution mechanisms as a way to guarantee the timely and effective resolution of cases through the mutual agreement procedure:

MAP Arbitration ensures that the cases filed under the MAP process are adjudicated upon in a timely manner. Implementing MAP arbitration could be an incentive to reduce the number of MAP disputes that are closed with no or only partial resolution but may also have a positive impact on more timely resolution of all pending MAP cases[16]. A number of jurisdictions have adopted the process of MAP Arbitration after seeing the benefits of the same whereas, some jurisdictions have raised concerns such as constitutional and sovereignty concerns and also concerns relating to the cost and resource constraints of such an Arbitration.


The OECD Consultation Documents on the BEPS Action 14 (MAP) shows that there still are significant shortcomings in the MAP process as being implemented by Jurisdictions. A majority of the recommendations arrived at after the Consultation aim towards making the MAP process more tax payer friendly and aims to reduce the burdens, specially financial burdens, on the tax payer. The recommendations also ensure that the the member countries implement the MAP process with certainty so that the case load on the country is reduced and only those cases that genuinely deserve to be instituted under the MAP process get the time and attention. The MAP process is very helpful in adjudicating and eliminating instances of double taxation and although it has so far been able to realise its aim of providing a fair and just platform, the recommendations brought about in the Public Consultation process will ensure that the shortcomings of MAP will stand eliminated and both, tax payers as well as the jurisdictions will have more faith in the working of the entire MAP process.

[1]Brown, J. and Shiers, R., 2016. BEPS Action 14: OECD detail on ‘MAP’ procedures. (1).

[2] 2016. BEPS ACTION 14: MAKE DISPUTE RESOLUTION MECHANISMS MORE EFFECTIVE. [online] Available at: <> [Accessed 25 March 2021].

[3] 2020. Committee of Experts on International Cooperation in Tax Matters. [online] Available at: <> [Accessed 22 March 2021].

[4] Brown, J. and Shiers, R., 2016. BEPS Action 14: OECD detail on ‘MAP’ procedures. (1).

[5] 2021. BEPS Action 14: Making Dispute Resolution Mechanisms More Effective 2020 Review. [online] Available at: <> [Accessed 25 March 2021].

[6] Id. at 2

[7] Id. at 2

[8] Id. at 7

[9] Id. at 8

[10]Id. at 9

[11] Id. at 9

[12] Id. at 11

[13] Id. at 13

[14] Id. at 13

[15] Id. at 14

[16] Id. at 15