Where the same income has been taxed in two countries at the same time, the taxpayer is not without remedies. Many double tax treaties (treaties on the avoidance of double taxation) provide an appropriate tool—namely the MAP procedure (Mutual Agreement Procedure), i.e., the mutual agreement procedure between tax administrations.
This is the first, introductory post in the MAP procedure series. In the next parts, individual aspects of this procedure will be developed further, with a particular focus on practical matters.
MAP procedure: what is it about?
The MAP procedure is most often associated with transfer pricing. However, it also applies to the double taxation of individuals’ income.
The MAP procedure is an international path for resolving a dispute based on a double tax treaty (DTT). In practice, the taxpayer applies to the competent authority (usually in the country of tax residence) so that it initiates consultations with the other country and works towards a solution eliminating taxation that is inconsistent with the DTT.
What is the purpose of the MAP procedure? Its objective is to reach a situation in which double taxation (or the risk of double taxation) of an individual’s income is eliminated.
MAP procedure: when does MAP make sense for an individual?
The MAP procedure is intended for situations where, with respect to the same income of an individual, two countries want to levy tax in a manner inconsistent with the DTT (e.g., where there is a dispute over tax residence or over the classification of income).
At what point should an MAP request be filed?
The MAP procedure is independent of domestic procedures. Filing a request to initiate MAP does not, as a rule, prevent an appeal, a court complaint, or an application for a tax overpayment determination.
Practical note: the Polish “DRM/MAP” Act (i.e., the Act of 16 October 2019 on the resolution of disputes concerning double taxation and on advance pricing agreements) provides that, in a request to initiate MAP conducted on the basis of a DTT, information must be disclosed about pending or completed proceedings concerning the same issue (including court judgments).
Importantly: if a Polish court issues a final (binding) judgment in the taxpayer’s case, it is binding on the Minister of Finance during MAP.
MAP procedure: who files the request in Poland and where?
As a rule, the request is filed with the competent authority of the taxpayer’s country of tax residence. In Poland, the request is addressed to the Minister of Finance.
Filing the request is free of charge. The request is not filed on any dedicated form.
How much time does the taxpayer have and how is the deadline calculated?
The taxpayer has 3 years to file a request to initiate the MAP procedure—counting from the date of the first notification of an action that gives rise to the disputed taxation. A particular DTT may provide for a different deadline (e.g., Italy, Mexico), so it is always worth verifying this in the relevant treaty.
An important practical point: the MAP deadline may run regardless of the fact that domestic proceedings are still pending—so the matter should not be left “until the end” if there is a risk of missing the deadline.
MAP procedure: what should be included in the request?
The Ministry of Finance indicates elements that allow the completeness and validity of the request to be assessed. In practice, it is necessary to prepare:
- identification and contact details,
- indication of the countries involved,
- the date of the “first notification” and the period (tax year),
- a description of the facts and why this violates the DTT,
- the taxpayer’s position (with references to the DTT provisions),
- information about other proceedings (in Poland and abroad),
- a list of attachments and copies of documents (decisions/reports, returns/settlements, proof of payment, correspondence).
Documents in a foreign language may require translation into Polish (depending on the authority’s needs and the nature of the case).
MAP procedure – how we can help?
In practice, MAP cases can be “invidious”: the taxpayer has already been through a dispute in one country, while simultaneously needing to organize documents and arguments so that the competent authority in Poland can efficiently initiate the MAP procedure and conduct discussions with the other country. Our support may include, among other things, an initial assessment of whether the case qualifies for MAP, preparation or review of the request, and organizing the evidentiary package.
Most often, our assistance includes:
- analysis of the situation under the relevant double tax treaty,
- verification of deadlines (including the deadline for filing an MAP request),
- preparation or review of the request and attachments,
- developing procedural strategy (the relationship between MAP and domestic remedies and parallel proceedings),
- coordinating the supplementation of materials requested by the authority.
Want to learn more? Write to us!
