Mutual Agreement Procedure Tax Treaty

In order to avoid double taxation due to possible measures taken by the tax administrator of another state in the context of the future controlled transaction, it is advisable to apply the request for harmonization of the principles of price-fixing of future controlled transactions and to conclude the agreement with the competent authority of another foreign state, in accordance with the provisions of the applicable tax treaty between the Republic of Lithuania and another State. , in order to avoid the taxation of income and capital. Once the application has been submitted, the procedure of mutual agreement can be initiated in accordance with the procedure provided for by the acts. The case is referred to the competent authority of the contracting state in which the subject is established within three months to three years, depending on the contract. Some contracts do not provide a time limit for removal. In addition, Article 17, paragraph 3, of the MLI for element 1.1 of measure 14 minimum comes into force. Access to the POP is granted for TP cases, even if the treaty does not contain Article 9, paragraph 2, of the OECD model tax treaty, particularly in jurisdictions that, in such cases, have not given access to POPs in the past. Historically, domestic tax remedies have been seen as the first approach to resolving international tax or transfer pricing disputes. Taxpayers have often initiated mutual agreement (POP) procedures to resolve a dispute and ensure security. The POP essentially offered a dispute resolution mechanism between the public authorities (amicable procedure), with the competent authorities striving to settle disputes relating to tax contracts on a consensual basis. Detailed information on the facts and circumstances that led to double taxation or non-treaty taxation in OECD countries, the average timetable for processing ADD is about two years. The POP is based on a first written phase between the relevant authorities, during which the tax authorities set out their respective positions, followed by a second phase of negotiations at joint committee meetings. Since the POP is a semi-diplomatic process, the subject does not have the right to consult written exchanges between the competent authorities of the Member States and does not participate in the negotiations himself.

At the end of the POP, the competent authority to which the case was initially referred by the subject, divides it on the result decided by the authorities of the two states. If the taxpayer accepts the solution presented, he is asked to refrain from any administrative or judicial recourse involving both the content and the form of the taxation at issue, in order to avoid any risk of a double exemption. If the subject rejects or does not respond to the proposal, the solution found by the authorities of both states is extinguished and the situation of the subject can be settled in each state on the basis of his interpretation of his legislation and the contract. Under the POP, the appropriate authorities are only required to exercise due diligence. If states fail to reach an agreement, the mutual agreement process will be closed without eliminating double taxation. In this case, the situation of the subject is settled in each state. The Mutual Agreement Procedure (MAP) (also known as the Competent Authority Procedure (CAP) is an administrative procedure designed to help resolve the difficulties arising from the competent authority (institution) – the public tax inspection of the Ministry of Finance of the Republic of Lithuania.