By Julie Martin, MNE Tax
The OECD on April 9 published six stage 2 reports approved by the “Inclusive Framework on BEPS,” an OECD-led body of 135+ countries, that assess cross border tax dispute resolution procedures in Austria, France, Germany, Italy, Liechtenstein, Luxembourg, and Sweden. The reports were approved by the Inclusive Framework during their December 11, 2019, meeting.
The six reports analyze the extent to which each country has complied with minimum standards on cross-border tax dispute resolution that were developed in 2015 by OECD and G20 countries as a result of the OECD/G20 base erosion profit shifting (BEPS) plan. The reports also describe the extent to which each country has improved its compliance with the minimum standards since the countries were first assessed by the Inclusive Framework. The first assessments were published on December 15, 2017.
Each of the six countries has agreed to adhere to the BEPS minimum standards on tax dispute resolution. These standards aim to prevent cross-border tax disputes; provide taxpayers with greater access to tax treaty procedures for resolving cross-border disputes, known as mutual agreement procedures (MAPs); and improve the resolution of MAP cases and the implementation of MAP agreements.
The reports state that each country met most of the minimum standards when they were first assessed in December 2017 and each has made some progress on some deficiencies identified at that time. None of the countries are completely compliant.
The Luxembourg report notes that Luxembourg tax treaties contain MAP provisions that generally follow the minimum standards. The country has ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) to bring its treaty network closer to complete compliance. Luxembourg does not yet have a plan to bring all treaties in line with the standard, though.
Luxembourg has a large MAP inventory, the report notes, comprised of many cases that do not involve allocation/ attribution issues, with 170 cases pending on December 31, 2017. The report states that Luxembourg receives a very large number of new MAP requests each year. In 2016–17, Luxembourg closed its non-allocation/attribution cases, on average, in less than 24 months, meeting the agreed-to standard, but it took longer to resolve allocation/attribution cases. The number of new allocation/attribution cases has been increasing and Luxembourg has been putting more resources toward addressing these cases, the report notes.
Germany’s extensive tax treaty network is largely compliant with the MAP minimum standards, though some deviations remain, the Germany report says. Germany has signed but not yet ratified the MLI and has put in place a plan to amend other tax treaties on a bilateral basis. The report notes that though Germany added competent authority staff in 2016–17, the time taken to resolve attribution/allocation cases remains longer than the 24-month objective.
The reports for Austria and Sweden both state that the countries have solved almost all deviations from the agreed-to minimum standards identified by the Inclusive Framework in 2017.
A few of Austria’s tax treaties do not include provisions that are fully compliant with the MAP minimum standards but these have been or will be cured because Austria has ratified the MLI and is negotiating with other treaty partners to achieve compliance.
Sweden also ratified the MLI to bring its tax treaty network into compliance. Unlike Austria, though, Sweden does not have a plan in place to put the remaining treaties in line with the standard, the Sweden report notes.
The Italy report states that Italy needs more competent authority staff to resolve MAP cases. It had 600 cases pending on December 31, 2017, many of which were old allocation/attribution cases. Also, while all of Italy’s tax treaties contain MAP provisions, most don’t fully meet the standard. Italy has signed the MLI but has not yet ratified it and it has a plan in place to renegotiate other treaties.
France has ratified the MLI without any reservation in the MAP article, the France report notes. This action has or will make most of France’s tax treaties compliant. The report notes that France does not meet the minimum standard on the prevention of cross-border disputes because it has not yet instituted rollback of advance pricing agreements. Italy also does not provide for APA rollbacks.
The Liechtenstein report notes the country has a small tax treaty network and a small MAP inventory, with only 12 cases pending on December 31, 2017. Improvements could be made regarding the speed with which MAP cases are resolved, particularly for attribution/allocation cases, the report states.
The OECD Secretariat noted that Austria, Germany, Italy, Luxembourg, and Sweden have all added more personnel to the competent authority function and/or made or initiated several organizational improvements with a view to handle MAP cases in a more timely, effective and efficient manner. Moreover, Austria, Germany, and Sweden decreased the amount of time needed to close MAP cases, the OECD noted.
Julie Martin
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].
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