Mutual agreement procedures (MAP) are a means of resolving disputes between two tax authorities when the actions of one or both authorities result or could result in taxation in breach of the double taxation treaty signed by both member states, or could cause double taxation. Any resident can initiate this procedure.
It is usually an out-of-court procedure, so that the tax authorities of the member states involved can negotiate a solution for the taxpayer subject to double taxation. This means that, even once this procedure has been started, other appeals against the tax authority’s actions that caused double taxation or taxation in breach of the double taxation convention can still be pursued. The key is that both prodedures can run in parallel –MAP and the procedure under national law– because relying on the mutual agreement procedure alone poses a risk since it could end without both member states reaching an agreement.
It is an informal procedure that is not regulated in the conventions. Therefore, to be able to request this procedure in Spain it has been regulated under Royal Decree 1794/2008, 3 November.
The deadline to request the procedure will be the one established in the double taxation convention (usually 3 years) counted from the date on which the tax assessment was notified. If two months pass and the Agencia Estatal de Administración Tributaria –AEAT– (Inland Revenue) has not asked for additional information or for any errors to be rectified, or one month after all of the requested additional documents have been received, the competent tax office will decide whether to accept the initial request or not, and the taxpayer will be notified. If no decision is announced in those time periods, the request will be considered to have been accepted.
Access to MAP can be denied in the following cases, among others: when the applicable convention does not provide for MAP, when the request has missed the deadline, when it is a matter of national law and not a discrepancy in accordance with the convention, when the taxpayer was trying to avoid paying taxes in either of the member states in question, where the request concerns a matter already addressed in a former MAP requested by the same taxpayer, and when the request to rectify errors and provide additional information has not been satisfactorily fulfilled.
The AEAT in Spain will have four months from the date on which the request for MAP is accepted to draft an initial proposal about the case. This proposal will be sent to the competent tax authority in the other member state. As many proposals as necessary will be exchanged to try to reach an agreement.
The usual period to reach an agreement is two years from the start of the procedure. If no agreement is reached in this time frame, the taxpayer can request that a consultation committee be set up to pass a decision about unresolved issues, or have recourse to international arbitration, subject to the provisions of the convention in question.