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  • MAP stages

    Stage one

    The first stage in the MAP process has three steps:

    • you submit your request to the APA/MAP program management unit
    • the CA considers whether your request is justified
    • if your request is justified, the CA determines if we can provide unilateral relief.

    Step 1: Submitting your request

    When we receive your completed MAP request, we will confirm whether you submitted it in time and to the correct CA.

    We will not accept a MAP request received out of time as there is no mechanism in Australia’s tax treaties for the CA to extend the time allowed to submit a MAP request.

    If you want to pursue domestic remedies in either jurisdiction, but are concerned about exceeding the time limits for presenting a case, you can lodge a protective MAP request

    See also:

    Step 2: Determining if your case is justified

    A CA will determine your case is justified if:

    • you have provided a sufficient factual and legal basis for your case
    • your MAP request demonstrates that            
      • the actions forming the basis of the request results or will result for you in taxation not in accordance with a tax treaty
      • the risk of such taxation is at least probable, not just possible.

    The CA will accept that the risk of taxation not in accordance with a treaty is probable if you have received written notification from us or the tax administration of a treaty partner country of an actual or proposed action. The notification should include details of what is to be adjusted, the amounts and the basis of calculation.

    After the CA determines the MAP request is justified, they will let you know your case has been accepted and placed into our MAP program.

    Actions that do not justify a MAP request include:

    • an audit or examination of your affairs or those of an associated foreign entity prior to the issue of a statement of audit position or equivalent position paper from another jurisdiction
    • exchange of information requests about dealings between you and an associated foreign entity
    • discussions between you (or an associated foreign entity) and us (or a foreign tax jurisdiction) about your tax affairs
    • public advice and guidance of a general nature, even if you believe it could apply to you and, if applied, may result in taxation not in accordance with the treaty.

    If the CA considers that your case is not justified, then we will advise you that we will take no further action in relation to your request.

    Step 3: Unilateral relief

    We will decide whether we can reach an appropriate solution ourselves. If this is not possible, such as when the taxation not in accordance with the tax treaty is due wholly or in part to an action taken in the other jurisdiction, we will try to resolve your case by mutual agreement with the CA of that jurisdiction (stage two).

    Stage two

    In this stage, we negotiate with the CA of the other jurisdiction. Both CAs will do their best to resolve your case. However, this does not mean that the CAs will resolve every case or necessarily relieve all taxation not in line with the treaty.

    In all instances and as part of the negotiations, the CAs will seek to establish a mutual understanding of the relevant principles embodied in the treaty, the facts of your case and how those principles are to be applied so as to relieve any taxation not in accordance with the treaty.

    For example, if we make the primary transfer pricing or profit reallocation adjustment, the Australian CA will try to demonstrate to the other CA that:

    • the adjustment results in tax in accordance with the treaty
    • the treaty partner country should relieve any resultant double tax.

    We will also seek to comprehend fully the other CA’s position and explore opportunities to reach agreement.

    How competent authorities communicate with each other

    CAs usually provide their positions to each other by exchanging position papers. If the CAs do not reach agreement after exchanging MAP position papers, they may discuss the matter with each other directly.

    In preparing our MAP position paper, we may take into account relevant information you provide (including information about your foreign associates) and information gained from any prior compliance activity.

    Competent authority mutual agreement

    When a mutual agreement is finalised between the CAs, we will notify you of the decision and provide an explanation of the result. If you accept the agreement, both tax administrations will be notified and you will be provided a letter confirming this agreement. The agreed adjustments will then be processed by the tax administrations to provide you the relief for double taxation.

    An appropriate solution arrived at by both CAs may result in us:

    • restoring your original tax position by withdrawing the adjustment which led to your MAP request
    • making a correlative adjustment or providing a tax offset or credit to relieve any double taxation
    • amending your tax assessment or tax payable if you agree with the MAP outcome.

    You may proceed with your domestic objection, review or appeal rights in relation to the assessment (or amended assessment) arising from issues that are outside the scope of the MAP or otherwise left unresolved.

    What happens if you disagree with the MAP outcome

    If you do not agree with the MAP outcome agreed by the CAs, you can seek tax relief under your domestic objection, review and appeal rights. In this case, the CAs will finalise your MAP case without implementing the agreement reached.

    See also:

    Impact of domestic dispute resolution processes on the MAP process

    The MAP provides an additional dispute resolution process to those available under the domestic legislation of Australia and other jurisdictions. You can request MAP regardless of the remedies provided by domestic law. If you are pursuing domestic law remedies, we will try to progress your MAP case as much as is possible, depending on the circumstances of your case.

    See also:

    Protective MAP request

    If you want to pursue domestic remedies in either jurisdiction, but are concerned about exceeding the time limits for presenting a MAP case, you can lodge a protective MAP request.

    If the request meets the requirements of MAP, we will:

    • accept the MAP request
    • advise the other jurisdiction of the request
    • defer CA negotiations until you inform us you would like the case to progress.

    Pursuing domestic remedies in the other jurisdiction

    Whether a MAP can progress while your objection, review and appeal rights are ongoing in the other jurisdiction depends on whether the CA in that jurisdiction is prepared to proceed with MAP negotiations concurrently.

    We will defer issuing any amended assessment, which can include a foreign income tax offset, until such time as the review and appeal rights in the tax treaty partner country have lapsed or are rescinded or exhausted.

    Pursuing Australian domestic remedies

    Where your matter is subject to administrative or judicial review, we may defer progressing your MAP request until the tribunal or court has made its determination.

    Where you seek internal independent review after receiving a statement of audit position from us, we will conduct the independent review concurrently with progressing your MAP request.

    Objections

    Objection undecided when CAs reach agreement

    Three scenarios can occur when the CAs reach agreement on your MAP request and you have an undecided objection. These are set out below:

    Scenario 1 

    If the CAs agree to restore you to your original tax position, we will finalise your MAP case. You will need to withdraw your objection in writing.

    Scenario 2 

    If both CAs resolve your MAP request whereby the adjustment is wholly or partly maintained and you agree with the agreement reached by the CAs, then you will need to withdraw your objection in writing.

    Scenario 3 

    If you are dissatisfied with the CA’s agreement, you can continue to pursue your domestic objection and review or appeal rights. As above, the CAs will finalise your MAP case without implementing the agreement reached.

    Objection finalised before CAs reach agreement

    If we allow an objection in full and there is no longer any taxation that is not in line with the provisions of the tax treaty, we will finalise the MAP case. If all, or some, of the MAP issues remain unresolved following an objection decision, the MAP will continue in an attempt to resolve the case.

    If the CAs have not agreed on an appropriate solution by the time we decide to disallow, or allow in part, your objection, you have the right to apply to the Administrative Appeals Tribunal (AAT) for a review of the objection decision or appeal to the Federal Court against the objection decision. Whether or not we continue the MAP during the review and appeal stages will be considered on a case by case basis.

    Court or tribunal decisions

    Once the AAT has made a decision or the Federal Court has made an order, the Australian CA will abide by that decision or order.

    When such a decision or order has been made, the Australian CA will seek to demonstrate to the other jurisdiction’s CA that the adjustment, consistent with the decision or order, is in line with the relevant tax treaty and that the other country should relieve the applicable double tax.

    Seeking arbitration to resolve a MAP case

    If the CAs involved in your case have not reached agreement within two years (three years for certain tax treaties) and the relevant tax treaty provides for arbitration, you can request that the CAs submit any unresolved issues to arbitration. 

    The Treasury Laws Amendment (OECD Multilateral Instrument) Act 2018 gives the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) the force of law in Australia. The MLI will modify some of Australia’s tax treaties to provide for mandatory binding arbitration. The date of effect and the availability of mandatory binding arbitration will vary between each tax treaty.

    See also:

    Penalties and interest under MAP

    Our tax treaties exclude penalties and interest imposed under the law of either jurisdiction from being ‘tax’ for the purposes of the particular tax treaty. Therefore you cannot seek relief under a MAP for any penalties or interest.

    Interest paid by us on overpayments of tax resulting from MAP

    If we relieve taxation not in line with the tax treaty that results in an overpayment of tax and the interest on overpayment rules apply, we may pay you interest on that overpaid amount.

    If the overpayment of tax has arisen from the provision of correlative relief for juridical or economic double taxation, the interest we pay is limited to the lesser of the amount of the:

    • interest payable under the Taxation (Interest on Overpayments and Early Payments) Act 1983 (Overpayments Act)
    • interest charged by the other jurisdiction making the transfer pricing or profit reallocation adjustment
    • relief being provided under the MAP agreement.

    This limitation applies to any year where correlative relief is provided by either amending the assessment of a year of income or by applying a credit for foreign taxes.

    Interest on overpayments arising from the provision of correlative relief will not be paid if the:

    • other jurisdiction does not require payment of interest on their primary adjustment that gave rise to the double taxation
    • interest required to be paid on that primary adjustment has not been paid by the time we provide relief from double taxation.

    If we were to pay interest in these circumstances, it would provide you with a windfall gain.

    Paying tax during the MAP process

    Requiring you to pay the tax that is the subject of your MAP request may result in double taxation until the case is resolved.

    For example, if we make a transfer pricing or profit reallocation adjustment, the same profits may become subject to tax in both jurisdictions. Also, if you are a dual resident, both jurisdictions may impose tax on the same income until the CAs in the MAP process resolve which jurisdiction is your country of residence for the purpose of the relevant tax treaty.

    If collecting tax during the MAP process may result in double taxation, we will defer legal action for recovery of those amounts, including any general interest charges (GIC), until an agreed future date (usually the date that the MAP is concluded), unless:

    • there is a risk to revenue
    • you have other liabilities unpaid after the due date or;
    • you have failed to meet other tax obligations when required.

    See also:

    Remission of GIC on tax which is part of a MAP and unpaid

    You can make a written request to have us remit GIC accrued for unpaid tax.

    For example, we can consider remitting some or all GIC if we are satisfied that:

    • you did not cause the delay in payment and you have taken reasonable steps to mitigate that delay or;
    • there are special circumstances making it fair and reasonable to remit all or part of the GIC or it is appropriate to do so.

    If we have deferred recovery of your tax debt until the MAP is completed, we can consider remitting the GIC accrued during the MAP in respect of the tax actually paid in the other jurisdiction (on the profits that both countries claim to tax), provided you do not get a windfall gain from this.

    For example, remitting GIC arising from non-payment of tax in Australia from a transfer pricing or profit reallocation adjustment in Australia would result in a windfall gain for you or your economic group where the other jurisdiction pays interest on overpayment after granting correlative relief.

    We may also consider remitting GIC if either jurisdiction has caused unreasonable delays in the CAs resolving the MAP. This recognises the potential financial disadvantage you may otherwise suffer when subject to MAP.

    See also:

      Last modified: 23 Sep 2020QC 56904