BEPS Report – Action 14 “Making Dispute Resolution Mechanisms More Effective”

BEPS Report – Action 14 “Making Dispute Resolution Mechanisms More Effective”

November, 2023

In recent days, the Organisation for Economic Co-operation and Development (OECD) published the report on the statistics of mutual agreement procedures (MAP) initiated and resolved in 2022. MAPs are a dispute resolution mechanism provided for in double taxation treaties whose purpose is to assist taxpayers in resolving disputes concerning international taxation, hand in hand with the tax authorities

Said report shows a substantial increase in taxpayers who have opted to resort to the MAP to seek a resolution to their tax disputes, with 2,493 new cases, 2,493 closed cases, and 5,398 pending cases in 2022. It is important to mention that of the 5,398 cases pending resolution at the end of 2022, 2,853 are related to transfer pricing matters. Now, the statistics related to the outcome of MAPs revealed that these have been a means of dispute resolution that taxpayers should not overlook, since 59% of the cases resolved in 2022 resulted in an agreement that completely eliminated double taxation, or favorably resolved the case outside the scope of the applicable international treaty, while only 3% were resolved without reaching an agreement and 6% were deemed inadmissible. In the Mexican context, the report also indicates an increase in MAPs, since prior to the start of 2022 there were 75 agreements initiated, of which 59 were transfer pricing cases and 16 were other cases; however, during that fiscal year 18 new cases were initiated, of which 17 correspond to transfer pricing. The foregoing indicates two main points: i. that the Mexican tax authorities are paying special attention to the determination of consideration in cross-border intercompany transactions; and ii. that Mexican taxpayers are opting to resort to the MAP to resolve this type of dispute, rather than the means of defense provided for in local legislation. The latter makes sense if we consider that, in the case of Mexico, the results, although to a lesser extent, have also been favorable, as they reflect that 39% of the resolved cases fully eliminated double taxation satisfactorily for taxpayers. On these terms, at Von Wobeser y Sierra we consider that MAPs are an alternative means of dispute resolution that is proving to be effective in resolving disputes related to matters of international double taxation and in providing certainty to taxpayers regarding the interpretation of certain local provisions and the double taxation treaties to which Mexico is a party; therefore, we are at your disposal to assist you in requesting the application of these procedures in the disputes that may arise. For additional information, please contact: Alejandro Torres, Partner:+52 (55) 5258-1072 | ajtorres@vwys.com.mx Luis Enrique Torres, Counsel:+52 (55) 5258-1023 | ltorres@vwys.com.mx Juan Manuel Morán, Associate:+52 (55) 5258 1023 | jmoran@vwys.com.mx

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