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How Mutual Agreement Procedure under the Multilateral Instrument Applies to Covered Tax Agreements

[1] Introduction to mutual agreement procedure (MAP)

A Mutual Agreement Procedure (MAP) is the dispute resolution mechanism contained in the article of double tax treaties concluded between the tax authorities (the competent authorities). Action 14 of the OECD/G20 BEPS package contains a commitment by the jurisdictions to implement a minimum standard for improving dispute resolution. This article aims to analyze the reservations made under Article 16 – MAP and see how the selected contracting jurisdictions apply Article 16 – MAP to the provisions of their covered tax agreements.

Scope of the MAP

The scope of the MAP tells us about what an MAP does in dispute resolution, which covers the following Articles in the OECD Model Tax Convention:

  • Determination of residence of a person (Article 4);
  • The existence of a permanent establishment (Article 5);
  • The attribution of profits to a permanent establishment (Article 7(2));
  • Inclusion of profits of associated enterprises and the corresponding adjustments to be made (Article 9(1) and Article 9(2))
  • Treatment of interest in case of thin capitalization (Article 11(6));
  • The taxation in the State of the payer – in case of a special relationship between the payer and the beneficial owner – of the excess part of interest and royalties (Article 9, Article 11(6), Article 12(4));
  • Temporary nature of the services performed by an employee (Article 15(2));
  • Non-discrimination (Article 24).

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Content provided by China Tax & Investment Consultants Ltd
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