By Nour Ali, regional tax consultant at DNV, Dubai
On 5 July, the Kingdom of Morocco (Morocco) officially issued the Mutual Agreement Procedure (MAP) guide through the General Tax Administration of the Ministry of Economy and Finance.
The purpose of the MAP guide is to describe the application process through which Moroccan taxpayers can request assistance from the General Tax Administration of the Ministry of Economy and Finance in its capacity as a competent authority to resolve disputes arising from taxation not in accordance with the provisions of the relevant double tax treaty, as well as to provide relevant information before requesting MAP.
The guide discusses on a high-level various aspects relating to the MAP (including how to access the MAP procedure, request to open a MAP, treatment of the MAP and closure), which will ensure an effective and efficient resolution of tax disputes within the double tax treaty framework.
MAP background
The main model tax conventions promote specific forms of administrative cooperation between tax authorities involved in a double tax treaty. Such models provide for a dispute resolution mechanism that arises with respect to the interaction of the domestic tax systems of countries or from the application of the double tax treaty itself.
The MAP sets out a mutual obligation upon the countries to exchange information that is relevant for the enforcement of their domestic tax laws or for the application of the double tax treaty between them, as well as mutual assistance in promoting the collection of revenue claims.
The OECD established certain action points in the context of the base erosion and profit shifting (BEPS) project to equip governments with domestic and international rules and instruments to address tax avoidance, ensuring that profits are taxed where the economic activities generating profits are performed and where value is created. This includes action point 14 on mutual agreement procedure.
Action point 14 seeks to improve the resolution of tax-related disputes between countries. Countries participating in the Inclusive Framework on BEPS have committed to comply with the minimum standard, which is reviewed and monitored through a robust peer review process that seeks to improve the efficiency and timeliness of the resolution of double taxation disputes.
On 5 March 2019, Morocco became the 129th jurisdiction to join the Inclusive Framework on BEPS.
Initiation of the MAP
The MAP guide specifies that any natural person or legal person having a tax residency in Morocco may submit a MAP request under the double tax treaty within a period of three years following the first notification of the measure resulting in taxation not in accordance with the provision of the double tax treaty.
Furthermore, the MAP can also be initiated by the competent authority of the country having a double tax treaty with Morocco to resolve difficulties arising from the interpretation or application of the double tax treaty or to consult with each other with a view to eliminate double taxation in cases not provided for by the double tax treaty.
Finally, the MAP guide provides for particular cases where MAP can be initiated. These cases include the situation of dual residence (for natural and legal persons), misinterpretation of the type of income (when two countries within a double tax treaty interpret the same income differently), as well as cases relating to an agreement following a tax audit/inspection leading to taxation contrary to a provision of the double tax treaty (i.e., the objective in this case is only to guarantee access to the MAP by giving the other country the possibility to eliminate double taxation and it shall not be interpreted as a commitment to review the terms of the agreement).
Access to the MAP
The MAP guide mentions that the MAP is guaranteed for all taxpayers who meet the conditions specified in the MAP article of the double tax treaty. The request to open the MAP must be signed by the taxpayer or a designated agent which confirms the accuracy of the facts and information presented in the request and undertakes to communicate in due time any other relevant information or document required for the MAP.
Furthermore, the MAP guide specifies that the MAP request shall be submitted in the country where the taxpayer is tax resident. In case the applicable double tax treaty provides for a different provision with respect to the MAP, reference shall be made to the double tax treaty to ensure the appropriate place of deposit of the MAP request. In cases where the double tax treaty provides that the request shall be submitted in Morocco, the request must be addressed to the General Tax Administration of the Ministry of Economy and Finance.
Request for the MAP
The MAP guide states that for the request to be accepted by the General Tax Administration, the request must be filed within the time limits provided for in the double tax treaty and must include several elements.
The elements required for the request to be acceptable are the taxpayer identity (including full name, company name, tax identification number, address, etc.), technical reference in the double tax treaty (including article number, text, etc.), tax notices/notifications (if applicable), the type of taxes and years concerned, argument put forward by the taxpayer (e.g., facts and circumstances leading to double taxation within the context of the double tax treaty), copies of supporting documents, copies of administrative/judicial appeals initiated by the taxpayer (if applicable) and any other support document necessary for the examination.
Timelines for the MAP Process
The MAP guide states that upon receiving the MAP request from taxpayers, the General Tax Administration shall inform the other country’s tax authority within a period of four weeks from the date of receiving the request.
In case the request is incomplete or does not have sufficient and necessary information, the General Tax Administration shall notify the taxpayer within a period of two months from the date of receiving the request and the taxpayer needs to fulfill the requirement of the notification at the earliest convenience. In case the taxpayer fails to fulfill the notification requirement, the General Tax Administration will close the MAP with immediate effect (the General Tax Administration shall inform the taxpayer and the other country’s tax authority with reasons of closure of MAP requests).
With respect to complete MAP requests, the date of opening of the MAP is the earlier of one week from the date of notification to the other country’s tax authority or five weeks from receipt by the General Tax Administration of the MAP request.
The General Tax Administration shall send its position paper to the other country’s tax authority within four months after opening the MAP request. In cases where the MAP was initiated in the other country, then the General Tax Administration shall endeavor to respond with six months from receiving the position paper from the other country tax authority.
MAP Mechanism
The MAP guide provides for two mechanisms to undertake a MAP (i.e., unilateral mechanism or bilateral mechanism).
Under the unilateral mechanism, tax will be relieved (fully or partially), and MAP will be closed unilaterally if the tax jurisdiction issued to the taxpayer by the General Tax Administration does not comply with the double tax treaty and the tax due falls entirely within the competence of the General Tax Administration.
Under the bilateral mechanisms, the General Tax Administration will endeavor to resolve the dispute through the exchange of notes under the MAP. The General Tax Administration may meet with the other country tax authority as part of a joint committee to work together to reach an agreement. Under the bilateral mechanism, taxpayers are not invited throughout the dispute settlement process. However, they may be required to provide more details and information that can support the MAP.
Closure of MAP
At the end of the MAP, several results are possible: granting of unilateral relief, agreement between the two tax authorities for the full or partial elimination of double taxation, agreement between the two tax authorities on the absence of taxation not in accordance with the provisions of the double tax treaty, or agreement on disagreement.
The closing date of the MAP is either the date on which the tax authorities inform the taxpayer of the results of the MAP request or the date on which the taxpayer decides to withdraw the MAP request.
Upon reaching an agreement between tax authorities, the taxpayer shall be informed, and the taxpayer shall express acceptance or rejection of the results of the MAP at the earliest convenience. If the taxpayer accepts the MAP results, the taxpayer shall cancel all proceedings initiated relating to the tax matters settled by the MAP.
Arbitration in Morocco
It is worth mentioning that Morocco does not provide for an arbitration mechanism relating to the MAP in double tax treaties.
Concluding thoughts
Morocco started taking considerable actions towards implementing the minimum standards of the Inclusive Framework by publishing the MAP guide, which will allow taxpayers to request application of the MAP provisions in cases where taxation is considered to be not in accordance with the provisions of the double tax treaty.
Taxpayers seeking to apply the MAP are required to be proactive with respect to the maintenance of minimum information requirements, as well as with the initiation of the mutual agreement procedure request to the General Tax Administration.
Taxpayers conducting business in Morocco can access the more than 50 double tax treaties of which Morocco is a part.
The MAP guide is available in French and all mutual agreement procedure requests can be sent in French to the Directorate of legislation, studies and international cooperation of the General Tax Administration in Rabat, Morocco.
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