The OECD recently released it’s 2020 Mutual Agreement Procedure (MAP) statistics, as part of the BEPS Action and the wider G20/OECD Tax Certainty Agenda to improve the effectiveness and timeliness of tax-related dispute resolution mechanisms.
As the OECD says, dispute resolution and MAPs are the cornerstone of a well-functioning tax treaty network, and the statistics play an important role – not only giving a global frame of reference, but country -specific information, which together shows progress made and identifies areas that need more work.
The statistics provide some interesting reading – including the point that MAP cases have increased in the majority of jurisdictions:
- MAP is concentrated. Around 2,500 new cases began in 2020, with 95% being in the top 25 jurisdictions and the remainder in around 40 different jurisdictions.
- New cases rose. The number of transfer pricing cases opened has kept increasing (almost +15%), while the number of other cases has slightly decreased compared to 2019 (-2%).
- Slight decrease in cases closed due to COVID-19. Around 5% fewer MAP cases were closed in 2020 than 2019, due partly to a decrease for other cases (-12%), while the number of closed transfer pricing cases increased (+6%). Competent authorities were able to close a significant number of cases in 2020 despite COVID-19, though simpler cases were prioritised. Nevertheless, MAP inventories have increased in the majority of jurisdictions and this may require additional actions in the coming years.
- Outcomes remain generally positive. Around 75% of the MAP cases closed in 2020 fully resolved the issue both for transfer pricing and other cases (compared to 85% for transfer pricing cases and 71% for other cases in 2019). Approximately 3% of MAP cases were closed with no agreement; up slightly on 2% in 2019. The number of cases withdrawn by taxpayers almost doubled in 2020 (11% compared to 6% in 2019).
- Cases still take a long time. The MAP cases closed in 2020 showed that, on average, transfer pricing cases took 35 months (up from 31 months in 2019) and other cases took around 18 months (22 months in 2019). Some jurisdictions experienced delays, particularly for more complex cases, and the pandemic affected communications with some treaty partners. While it is not possible to estimate the time needed to close pending cases, the data shows that around 15% of the 2020 inventory relates to cases that have been pending for at least five years.
The OECD also announced the winners of this year’s MAP Awards – in recognition of particular efforts by competent authorities.
- Shortest time in closing cases: Switzerland (transfer pricing) and Australia (other cases)
- Smallest proportion of pre-2016 cases in end inventory: Spain
- Most effective caseload management: Luxembourg and Norway
- Pairs of jurisdictions most effective with their joint caseload: Italy/Spain for transfer pricing cases, Norway-Sweden for other cases
- Most improved jurisdiction: Ireland
Auxadi’s tax teams are located in all of our 22 offices, with the local and global expertise needed to help unravel your tax complexities.
It’s also interesting to note that the OECD counts transfer pricing cases separately – confirming our thoughts that transfer pricing is a particularly complex area – and that resolving transfer pricing disputes can take almost 3 years! Luckily, Auxadi have expert knowledge available to help your transfer pricing.
If you’d like a chat to see how our transfer pricing expertise can help make your life easier, get in touch today.
Contact our team today to find out exactly how we can help you
Local Knowledge – International Coverage
Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance and payroll services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 22 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.
All information contained in this publication is up to date on 2022. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.