Dispute resolution

OECD Launches Project on Improving the Resolution of Cross-Border Tax Disputes


As global trade and investment increases, the possibility of cross-border tax disputes necessarily increases as well. Left unresolved, these disputes can result in double taxation and a corresponding impediment to the free flow of goods and services in a global economy. Both governments and business need effective procedures to keep such disputes to a minimum and to resolve them satisfactorily when they arise.

The OECD's Centre for Tax Policy and Administration (CTPA) has been actively involved in developing procedures to deal with these issues. Looking to resolve tax disputes before they start, the OECD has helped establish internationally accepted procedures for so-called "Advance Pricing Agreements (APAs)" in which governments and taxpayers can agree in advance the appropriate approach to determine the "arm's length" price to be charged in transactions between related entities. Bilateral APAs (i.e. APAs involving the competent authorities of the tax administrations affected by the transactions) create an assurance in advance for taxpayers that a consistent approach will be taken by the governments involved in a cross border transaction, thus avoiding the possibility of costly later disputes. The work on avoiding disputes culminated in the publication of the Annex to the OECD Transfer Pricing Guidelines on conducting APAs under the Mutual Agreement Procedure of Article 25 of the OECD Model Tax Convention (MAP APAs).

Work has now moved on to focus on solving cross border tax disputes where they arise and to broaden the scope to all treaty disputes and not just transfer pricing. The mutual agreement procedure ("MAP") provided for in tax treaties, which follow the OECD Model Convention has been the traditional mechanism to solve these disputes. The MAP allows tax authorities to meet together to attempt to resolve differences in a manner that ensures that double taxation will be avoided and that there will be an appropriate application of the convention. The MAP has worked reasonably well in the past, but both the number of cross border disputes as well as the complexity of the cases involved has increased. Improving the effectiveness of the operation of the MAP and, equally important, assuring that the cases involved in the MAP process will come to a satisfactory conclusion is the focus of an important new project at the OECD.

The OECD's Committee on Fiscal Affairs formed a Working Group charged with examining ways of improving the effectiveness of the MAP, including the consideration of other dispute resolution techniques that might be used to supplement the operation of the MAP. The Working Group consists of government officials with expertise in tax treaties and government officials with expertise in transfer pricing. The mandate of this group has recently been extended until January 2007. It has already had five meetings and some important outcomes have already emerged.

The Working Group compiled the Country Profiles of Mutual Agreement Procedures which contain the OECD member countries’ information about the Competent Authorities, contact details, domestic guidelines of MAP and other useful information both for tax authorities and taxpayers. These Country Profiles can be found on the OECD website at the CTPA homepage ( The OECD is also hoping to make available similar information for Non-OECD economies.

The Working Group produced a Progress Report that describes three different kinds of proposals:

  1. Current proposals were actions that could be taken to improve MAP without further work needed at the Working Group level – often these involved review by individual countries of MAP time frames or other practical aspects of MAP, with a view to improving effectiveness and transparency. 
  2. Future work, where a possible solution had been identified but where further work within the Working Group is needed to  develop that proposal.  The main output coming from these proposals is likely to be an online “Manual on Effective Mutual Agreement Procedures” (MEMAP). This manual will provide guidance for both taxpayers and tax administrators as to appropriate practices. Work on examining the feasibility of potential dispute resolution techniques that could supplement MAP is also in this category.
  3. Future study, where further work is needed to determine if an issue could appropriately be addressed as part of this project.

The Progress Report was released in summer of 2004 for public comment and the intention is to hold a final consultation with commentators and business representatives in Tokyo, 13 March 2006 to discuss the proposals to date (please see the link to "What's New" for more information). This builds on the very successful consultation held in December 2003 and January 2004. 

The issues which have been considered by the Working Group and that are discussed in the Draft Progress Report follow, in a broadly chronological sequence, the various steps in the MAP process. The work covers both operational issues and substantive issues. Operational issues include topics such as: the transparency of the procedures; the role of the taxpayer in the process; the cost of the process; establishing a timeframe for settlement, etc. Substantive issues include:  the scope and purpose of Article 25; the interaction between MAP and domestic law, constraints on the ability to use or implement the MAP, time limits, suspension of tax and interest, etc. 

Particular attention is being focused on ways to ensure that the MAP process will reach a satisfactory conclusion and that the conclusion is reached within a reasonable timeframe. Under the existing MAP, if after the end of discussions, the countries involved in a dispute cannot agree, the dispute remains unresolved and can result in unrelieved double taxation.  Further even if the case is agreed, the procedure can sometimes take a long time and use a lot of taxpayer and tax administration resources. Such results are unsatisfactory to all concerned.  A number of supplementary techniques are therefore being considered to deal with such situations, ranging from an advisory opinion to a more formal arbitration process.

The Working Group is currently analyzing the feasibility of implementing the mandatory resolution of unresolved MAP cases for use only by countries that wished to provide for binding resolution of all cases. Such a possibility would constitute a mandatory submission but also acceptance in advance of the result.  This would involve the development of the text of a new Model Tax Convention Article and attendant Commentary.

It should be stressed that the work on supplementary dispute resolution is exploratory in nature – no decision has been reached as to whether such mechanisms should be used.
For further information please contact Paul Mulvihill, e-mail:; téléphone - 33 (0) 1 45 24 78 70 or Mary Bennett (Head of TTP), e-mail: mary.bennett@oecd,org ; téléphone 33 (0) 1 45 24 94 90.


Related Documents