OECD proposes revised “minimum standards” for nations on cross-border tax dispute resolution

By Julie Martin, MNE Tax

The OECD Secretariat has requested public feedback on proposals designed to strengthen the Action 14 minimum standards on cross-border tax dispute resolution for nations, including a proposal that would require all countries with more than a few transfer pricing cases establish an advance pricing agreement (APA) program.

Feedback is requested on the OECD proposals by December 18; a public consultation will be held in early 2021.

The Action 14 minimum standards were established in 2015 by OECD and G20 nations. The standards have since been adopted by 137 nations that are members of the OECD-led “Inclusive Framework on BEPS.” Inclusive Framework members have also agreed to be peer-reviewed on their compliance with the standards, though 55 countries obtained a deferral from this peer review.

The Action 14 standards were established to encourage countries to improve the mutual agreement procedure (MAP) provided for in bilateral tax treaties and the local administrative processes that govern tax dispute resolution.

As a part of a planned 2020 review of the standards, the OECD Secretariat has suggested that countries adopt a new minimum standard that would make the establishment of an APA program that allows for bilateral APAs mandatory, except in cases where a country has a very low volume of transfer pricing MAP cases. Under Action 14, setting up an APA program is considered a best practice and is thus not mandatory.

The OECD secretariat also proposes to require all countries to agree to more clearly defined criteria for taxpayer access to MAP. Standardized documentation requirements would also be introduced for MAP requests. The OECD offers suggestions as to the minimum information and documentation taxpayers would need to provide.

Other proposed minimum standards would require countries to suspend tax collection for the duration of the MAP process under the same conditions as are available under domestic rules; align interest charges and penalties in proportion to the outcome of the MAP process; introduce a proper legal framework to ensure the implementation of all MAP agreements; allow multi-year resolution through MAP of recurring issues with respect to filed tax years; and implement MAP arbitration or other dispute resolution mechanisms.

The OECD secretariat also proposes to require countries to train their auditors and examiners on the Forum on Tax Administrations’ global awareness training module and offers several proposals to strengthen the MAP statistics reporting.

The OECD also asks for taxpayers’ experiences with the MAP in the 55 counties that have obtained a deferral from Action 14 peer review. The Inclusive Framework will review whether to continue this deferral as a part of the reevaluation of Action 14.

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Julie Martin

Founder & Editor at MNE Tax

Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.

Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.

Julie can be reached at [email protected].

@mnetax

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Julie can be reached at [email protected].