Improving dispute resolution mechanisms as regards the application and interpretation of tax treaties is high on the agenda of the OECD and a number of countries.
Under BEPS Action 14, there is a broad commitment to implement a minimum standard to strengthen the effectiveness and efficiency of Mutual Agreement Procedures (“MAP”). One of the measures is a peer review and monitoring process as regards the implementation of the minimum standards and recommendations.
The OECD has recently released the stage 2 report concerning Belgium’s MAP practice. According to the report, Belgium worked to address most of the identified deficiencies following the stage 1 review of its MAP programme.
The main findings of stage 2 of the Belgian MAP peer review include:
- All tax treaties concluded by Belgium contain a MAP article, usually based on the OECD Model Tax Convention – 2017 version;
- Where some defects may appear in the text of the MAP article (e.g. a time limit for submission of a MAP request shorter than 3 years; reference to implementation of MAP outcomes irrespective of any time limits under domestic law, etc), most issues are solved through the ratification of the MLI or through the ongoing renegotiations of the relevant treaties (if not a MLI covered treaty);
- Broadly all peer countries indicated having good working relationships with Belgium in regard of MAP and noted the efforts made by Belgium’s competent authority in order to accelerate the resolution of MAP cases;
- Belgium is one of the 28 countries that opted for the mandatory and binding arbitration mechanism under BEPS Action 14 (part VI of the MLI);
- In March 2018, Belgium has published MAP guidance (Circular 2018/C/27) on the availability of MAP and how it applies this procedure in practice complemented with a FAQ;
- Belgium has a bilateral APA programme in place which now also enables taxpayers to request roll-back of bilateral APAs and such roll-backs are granted in practice;
- Belgium has meanwhile transposed the new EU Directive on Tax Dispute Resolution Mechanisms (see also here).
Processing time and resolution statistics
According to the statistics, Belgium has a high inventory of MAP cases with a very large number of new cases submitted each year and more than 730 cases pending on 31 December 2017. It should be noted that of these cases, only 11% concern transfer pricing attribution/allocation cases.
MAP cases involving Belgium were closed on average within a timeframe of less than 24 months (which is the pursued average for resolving MAP cases received on or after 1 January 2016). The average time necessary was 16 months. Although the time taken to close transfer pricing attribution/allocation cases slightly decreased over time, it is still significantly longer (33 months) than the average time to close other cases (15 months) due to the complexity of those cases.
Of the 62 transfer pricing cases closed during the statistics period, it is reported that 61% of the cases ended with a full resolution of the double taxation. 13% of the cases were withdrawn by the taxpayer and 15% of the cases related to an objection that was not justified.
Of the 913 other cases closed during the statistics period, it is reported that 53% of the cases ended with a full resolution of the double taxation. For 29% of the cases, unilateral relief was granted.
The current staffing of the Belgian Competent Authority MAP unit is 11 FTEs. Belgium reported that it has hired more resources and has scheduled more face to face meetings with its treaty partners in order to discuss the pending attribution/allocation cases and also that it uses more frequently electronic channels of communication.
The full report is available on the website of the OECD by clicking here.
For more strategic insights and a discussion on how your tax disputes may be resolved more effectively, please contact Bram Markey.
- Base erosion and profit shifting (BEPS)
- Corporate income tax
- International taxation
- Tax controversy and dispute resolution (TCDR)
- Transfer pricing