A MAP procedure checklist is a practical list of items worth preparing before a taxpayer applies to initiate a mutual agreement procedure. In our previous post, we explained what the MAP procedure is and when it can help in cases of double taxation. This time, we focus on what should actually be checked, collected and organised before submitting the application.
In our previous article, we discussed the basics of the MAP procedure, i.e. a situation where the same income has been or may be taxed in two countries in a manner inconsistent with a double tax treaty. You can read that post here:
This article regarding MAP procedure checklist is the next step – a practical checklist for the taxpayer.
MAP procedure checklist – when is it worth considering?
The MAP procedure is not an ordinary appeal against a tax decision or a standard application for an individual tax ruling. It is an international procedure in which the competent authorities of two countries try to resolve a dispute concerning taxation that is inconsistent with a double tax treaty.
In practice, the MAP procedure may be relevant, for example, when:
- two countries treat the taxpayer as their tax resident,
- the same income from employment, business activity, a management contract, dividends, interest, royalties or capital gains has been taxed in two countries,
- one country classifies the income differently from the other,
- a foreign tax authority has refused to apply a double tax treaty,
- the taxpayer paid tax abroad, but Poland does not agree with the method of settling it,
- there is a dispute concerning transfer pricing or the attribution of income to a foreign permanent establishment.
The key question is whether the problem results from taxation that is inconsistent with the relevant double tax treaty. If so, the MAP procedure may be one of the tools worth considering.
What should be checked first?
Before preparing the application, it is worth starting with a few basic questions. These usually determine whether the case is suitable for MAP and how it should be described.
First, it is necessary to determine which countries the dispute concerns.
Second, it is necessary to check the relevant double tax treaty. Each case should be analysed against the background of a specific treaty, not only general principles. Incidentally, provisions concerning tax residence, employment, business activity, dividends, interest, royalties, capital gains or methods for eliminating double taxation may be particularly important.
Third, it is necessary to determine when the taxpayer received the first notification of the action resulting in the disputed taxation. This is very important because, as a rule, the deadline for submitting a MAP application is 3 years from that first notification.
Fourth, it is necessary to check whether any other proceedings concerning the same issue are already pending or have been completed in Poland or abroad. The MAP procedure is generally independent of domestic procedures, but information about such proceedings must be disclosed in the application.
What documents should be prepared for the MAP procedure?
Documentation is very important in MAP cases. The authority will not conduct the case solely on the basis of a general description provided by the taxpayer. It is necessary to show what the problem is, which income is covered by the dispute and why double taxation has occurred or may occur.
In practice, if you concern MAP procedure checklist, it is worth preparing in particular:
- tax returns from Poland and abroad for the years covered by the case,
- decisions, letters, requests, protocols or other documents from tax authorities,
- confirmations of tax payment in Poland or abroad,
- documents confirming the type of income, e.g. contracts, payslips,
- tax residence certificates, if issued,
- documents confirming the place of residence, centre of vital or economic interests, if the dispute concerns tax residence,
- correspondence with tax authorities and courts,
- a calculation of income and tax in both countries,
- a description of how the same income was treated in Poland and abroad.
If the documents are in a foreign language, in practice it may be necessary to translate them or at least prepare a working summary in Polish. A sworn translation of all documents is not always required immediately, but the case must be organised in such a way that the Polish authority can understand the facts and the tax issue.
MAP procedure checklist – what should the case description include?
One of the most important elements of the application is the description of the facts. In MAP, it is necessary to show the mechanism of the dispute.
A good description should answer, among other things, the following questions:
- who the taxpayer is and where they were tax resident in the relevant period,
- which tax year or settlement period the case concerns,
- which income the dispute concerns,
- in which country the income was taxed and on what basis,
- whether the tax has already been paid or whether the obligation to pay it is only a risk,
- which provisions of the double tax treaty are relevant,
- why, in the taxpayer’s view, taxation inconsistent with the treaty has occurred,
- what proceedings are pending or have been completed in Poland and abroad,
- what the taxpayer expects from the MAP procedure.
In practice, it is also worth preparing a short chronology of events. In international cases, chronology often organises the entire analysis: dates of departure, changes of place of residence, earning of income, filing of tax returns, receipt of decisions, payment of tax and correspondence with authorities.
Most common mistakes made by taxpayers
In MAP cases, the problem is often not double taxation itself, but reporting the case too late, lack of organised documents or an imprecise description of the issue. Taxpayers often fail to check the deadlines resulting from the specific double tax treaty, mix different years and categories of income, or fail to clearly show which income was taxed in two countries.
It is worth remembering that MAP is not an automatic procedure. The main task is to demonstrate that the actions of one or both countries result or may result in taxation that is inconsistent with a double tax treaty.
How can we help?
In MAP cases, the most important thing is to organise the facts, documents and tax arguments. This is particularly important when the case concerns several countries, several tax years or parallel proceedings. That’s why we have prepared this MAP procedure checklist article.
Our support may include, among other things:
- a preliminary assessment of whether the case qualifies for the MAP procedure,
- analysis of the relevant double tax treaty,
- verification of the deadline for submitting the application,
- organisation of documents and chronology of events,
- preparation or review of the MAP application,
- assessment of the relationship between MAP and domestic proceedings,
- support in communication with the competent authority in Poland.
The MAP procedure can be an important tool in cases where the taxpayer has genuinely found themselves between two tax systems. However, it is not worth starting with the form or letter itself. First, it is necessary to check whether the problem actually results from a breach of a double tax treaty and whether the taxpayer has documents that make it possible to demonstrate this problem.
If you have a problem with double taxation of income in Poland and abroad or you have simply questions regarding MAP procedure checklist, write to us. We can help assess whether the MAP procedure will be the right course of action.
