TPG2022 Chapter IV Annex II paragraph 20

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When deciding whether a MAP APA is appropriate, a key consideration is the extent of the advantage to be gained by agreeing a method for avoiding the risk of double taxation in advance. This requires the exercise of judgement and the need to balance the efficient use of limited resources, both financial and human, with the desire to reduce the likelihood of double taxation. Tax administrations might consider the following items as relevant:
a) Does the methodology and the other terms and conditions of the proposal respect the guidance given by the Guidelines? If not, it will be desirable to get the taxpayer to revise the proposal accordingly, in order to increase the chances of reaching a mutual agreement. As paragraph 17 of the preface to the Guidelines states “these guidelines are also intended primarily to govern the resolution of transfer pricing cases in mutual agreement proceedings”.
b) Are any “difficulties or doubts as to the interpretation or application of the Convention” likely to significantly increase the risk of double taxation and so justify the use of resources to settle any problems in advance of the proposed transactions?
c) Would the transactions covered by the proposal be ongoing in nature and is there a significant part of any limited life project left?
d) Are the transactions in question seriously contemplated and not of a purely hypothetical nature? The process should not be used to find out the likely views of the tax administration on a general point of principle
– there are other established methods for doing this in many countries.
e) Is a transfer pricing audit already in progress in relation to past years where the fact pattern was substantially similar? If so, the outcome of the audit may be expedited by participating in a MAP APA, the terms of which could then be applied to inform or resolve the audit and any unresolved mutual agreement for earlier years.

Related Guidelines