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Alexander Grinko |
The BEPS Action 14 report "Making Dispute Resolution Mechanisms More Effective" (hereinafter, the 2015 Action 14 Report) contains a commitment by countries to implement a minimum standard to ensure that they resolve treaty-related disputes in a timely, effective and efficient manner by publishing their Mutual Agreement Procedure (MAP) profiles.
As part of implementation of the 2015 Action 14 Report, at the end of 2016, the Russian Federation submitted to the OECD its MAP profile, providing comprehensive contact details for the authorities, links to publicly available information, guidance and other useful country-specific information regarding the MAP process.
What does the Russian MAP profile contain?
The MAP is the procedure by which the representatives of states that have entered into bilateral tax treaties can resolve disputes, difficulties or doubts arising in relation to the interpretation or application of the said treaty.
The Russian MAP profile covers the availability of and access to the MAP. It clearly indicates the important issues covered within the MAP's scope, which include:
Transfer pricing cases;
Issues relating to the application of treaty anti-abuse provisions;
Issues relating to the application of domestic anti-abuse provisions; and
Double taxation cases resulting from bona-fide taxpayer-initiated foreign adjustments.
In addition to these, the Russian MAP profile confirms that taxpayers are allowed to request MAP assistance in cases where the taxpayer has sought to resolve the issue under dispute via judicial and administrative remedies provided under the domestic law of the Russian Federation.
On the other hand, the Russian MAP profile points out that:
There is no guidance on multilateral MAPs and there are no explanations regarding the relationship between the MAP and the domestic law administrative and judicial remedies publicly available;
There are no example timeframes for the steps to be taken by the relevant authorities from receipt of a MAP case to when the taxpayer receives resolution, and no publicly available statistics on the time taken to resolve MAP cases; and
In cases when the agreement reached by the competent authority through the MAP process leads to a refund of tax due or paid by the taxpayer, there is no publicly available information on the timeframe by which the taxpayer could expect its tax position to be amended to reflect the reached agreement and/or a refund of the tax paid.
The issues covered by the Russian MAP profile relate to the most controversial tax disputes regarding cross-border transactions affecting the taxation of a wide circle of companies, including the Russian subsidiaries of multinational companies and Russian companies that have subsidiaries abroad.
The Russian MAP profile is a first step towards resolving treaty-related disputes in an effective and efficient manner. In addition, there is hope that its drawbacks, which include uncertainty regarding the MAP's timeframes and a lack of guidance, will be eliminated as the procedure is developed.
Alexander Grinko (agrinko@kpmg.ru), Moscow
KPMG in Russia and the CIS
Tel: +7 (495) 937 44 77
Website: www.kpmg.ru