On September 16, 2019, the OECD released the 2018 mutual agreement procedure (MAP) statistics, covering all the 89 members that joined the Inclusive Framework (IF) prior to 2019. These statistics reflect the commitments made by the members of the Inclusive Framework on Basic Erosion and Profit Shifting (BEPS) to adhere to the minimum standard under Action 14 of the BEPS Action Plan, which includes, inter alia, the timely and complete reporting of these statistics.

In this insight, the authors provide an overview of key statistics, followed by some takeaways for businesses on how the MAP process is evolving (for the better) and how it can be better employed going forward.

2018 MAP statistics: Highlights and trends

The 2018 statistics provide some interesting insights in the workings of the MAP and how tax authorities are taking steps to make the process more transparent and effective. Overall, the statistics show that over 2,000 MAPs were started in 2018, and slightly more than that have been closed.

Of the 2,704 resolved cases in 2018, 59% resulted in an agreement that fully or partially resolved double taxation or taxation not in accordance with tax treaty. A further 17% of cases were resolved by one treaty partner providing unilateral relief, and 4% were resolved based on domestic remedy. Only 2% of cases were closed with no agreement, including an agreement to disagree. The other 18% were: cases withdrawn by the taxpayer (6%); where objection was considered not justified or agreement that there was no taxation not in accordance with tax treaty (5%); where access to MAP was denied (6%); and any other outcome (1%).

On average, the time that countries took to close these cases was 33 months for transfer pricing cases (higher than the recommended best practice of 24 months and higher than the 30 month average in 2017), and an average of 14 months for non-transfer pricing cases (which was lower than last year’s average of 17 months).

The table below shows the 2018 MAP statistics for selected jurisdictions. Some of these statistics are surprising; for example, the number of new cases started in the Netherlands (more than the starting inventory), with the Dutch competent authorities able to close more cases than at the beginning of the year. The same is true for Luxembourg, although only by one case.

Country 2018 Start Inventory Cases started in 2018 Cases closed in 2018 2018 End Inventory
US 1,005 253 251 1,007
India 778 148 85 841
Germany 1,241 615 658 1,196
France 885 449 362 972
Ireland 42 28 12 58
Italy 587 256 101 742
Netherlands 337 357 373 321
UK 453 251 274 430
Spain 279 211 82 408
Switzerland 337 170 158 349
Luxemburg 173 243 244 172


Key takeaways and the future of MAP

It is interesting to note that countries have, on average, closed more cases than they started with in 2018. Tax authorities in many countries have attempted to improve the understanding of the workings of MAP by providing detailed guidance on procedures, and many have increased their resources to handle MAP cases. We applauded the OECD initiative to provide awards for best performances in handling and resolving MAP cases, as well as facilitating meetings between relevant competent authorities at OECD events. Given these developments, it is now more important than ever that taxpayers and their advisors “shake off” historical reservations about the MAP process and give the use of MAP objective and well-informed consideration.

Among the usual holding company locations, handling and resolving MAP cases is clearly a relevant competitive factor in the post-BEPS environment. These tax authorities that used to compete over competitive tax measures and rulings practice must now appreciate that, while the traditional measures are increasingly being scrutinized by the OECD and the EU, taxpayers are looking for them to show leadership when it comes to resolving cross-border tax disputes and double taxation concerns. The Dutch and the Luxembourg competent authorities are clearly leading the way in this area.

That said, one of the trends that requires further analysis is the 18% of cases that fall into the other reasons category. In our experience, the proliferation of unilateral measures involving taxes not covered by tax treaties and the ambiguities around country practices in illegal treaty overrides are often associated with these cases. Now that the OECD has shed some light on the dark corners of access to MAP and effective resolution of MAP cases, it may be time to update the 1989 OECD standards on treaty overrides.

An encouraging related development (that almost certainly has escaped the attention of many practitioners) is a recent case involving the UK’s diverted profit taxes (DPT) in the First Tier Tribunal Tax Chamber involving Glencore Energy UK Limited and Glencore International AG (Case TC07252). Although the case involves a procedural issue in respect of the interaction between domestic procedure and MAP, the substance of the case suggests that Swiss and UK competent authorities have both accepted a MAP case involving UK’s DPT. This is particularly encouraging as the line between legitimate and illegitimate treaty override is a complex, factual exercise, not one that should be - nor in our opinion can be - taken lightly in the post-BEPS Action 14 environment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.