Dispute Resolution for International Tax E-Book

Inter-American Center of Tax Administrations

• Herausgeber: Centro Interamericano de Administraciones Tributarias
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 97

Veröffentlichungsjahr: 2025

Beschreibung

These three sections of the publication are each authored by a different expert. The first section delves into contemporary debates surrounding the MAP, with a particular focus on its application in developing countries and the implications of the OECD’s BEPS Action 14 proposals. The second section explores international tax arbitration, providing an overview of its evolution, the challenges it presents, and its impact on global tax governance. The final section offers forward-looking reflections on the role of mediation in international tax, evaluating its potential as a complementary or alternative tool for dispute resolution.
Part 1. Contemporaneous Debates for MAP Regulations in Developing Countries
(Focus on the Colombian Experience)
Part 2. International Tax Arbitration: What it Means and How it Has Evolved
Part 3. Prospective Reflections on Mediation in the International Tax Context

Leseprobe

Dispute Resolution for International Tax: Reflections on Arbitration, the Mutual Agreement Procedure, and Mediation

© 2025, Inter-American Center of Tax Administrations

ISBN: 978-9962-722-79-3

Natalia Quiñones

Ubaldo González de Frutos

Edson Uribe

Coordinated by:

Anarella Calderoni

Isaác Gonzalo Arias E.

Intellectual Property

The opinions and arguments expressed in this publication are the sole responsibility of the authors and do not necessarily reflect the official position of the Inter-American Center of Tax Administrations (CIAT), its Executive Council, its Executive Secretariat, or its member countries.

The content is protected by copyright. Its use and reproduction for educational and non-commercial purposes are permitted, provided the source is cited. For any other use, prior authorization from CIAT is required.

For official information, please visit www.ciat.org

Content

Introduction

By: Anarella Calderoni and Isaác Gonzalo Arias Esteban

Part 1. Contemporaneous Debates for MAP Regulations in Developing Countries (Focus on the Colombian Experience)

By: Natalia Quiñones

Introduction

1.1. General Policy Orientation

1.2. Resources and Assigning the MAP Function

1.3. Legal and Regulatory Faculties

1.4. Time Limits

1.5. Interaction with Domestic Remedies

1.6. Interaction with Collection Mechanisms

1.7. Multiyear Resolution, Interest, and Penalties

1.8. Taxpayer Participation and Requested Information

1.9. Arbitration and Supplementary Dispute Resolution

Conclusions

References

Part 2. International Tax Arbitration: What it Means and How it Has Evolved

By: Ubaldo González de Frutos

2.1. A Decisive Moment for International Tax Arbitration

2.2. Inarbitrability

2.3. The Proliferation of Conflicts with Globalization

2.4. Arbitration Arising Out of Investment Protection Treaties

2.5. Tax Arbitration in European Union Law

2.6. Arbitration Under the OECD Model Convention

2.7. BEPS Action 14

2.8. The Multilateral Instrument

2.9. Mandatory and Binding Arbitration in the Multilateral Treaty of Pillar One

Conclusions

References

Annex 1

Part 3. Prospective Reflections on Mediation in the International Tax Context

By: Edson Uribe

3.1. The UN's Work on the Avoidance and Resolution of Tax Disputes

3.2. On the Lost Opportunity of Deeply Reflecting about Mediation in the MAP

3.3. MAP: An Equal Set of Rules for Operators with Different Realities

3.4. Could Mediation Provide Effectiveness to the MAP?

Conclusion

References

Introduction

By: Anarella Calderoni and Isaác Gonzalo Arias Esteban

The resolution of international tax disputes has become an increasingly pressing issue as cross-border tax matters grow in complexity with international solutions that are not aligned. Ensuring that tax disputes are addressed in a fair, efficient, and consistent manner is essential for maintaining international cooperation and taxpayer confidence. Against this backdrop, this document examines three key aspects of dispute resolution in international tax: the Mutual Agreement Procedure (MAP), arbitration, and mediation.

These three sections of the publication are each authored by a different expert. The first section delves into contemporary debates surrounding the MAP, with a particular focus on its application in developing countries and the implications of the OECD’s BEPS Action 14 proposals. The second section explores international tax arbitration, providing an overview of its evolution, the challenges it presents, and its impact on global tax governance. The final section offers forward-looking reflections on the role of mediation in international tax, evaluating its potential as a complementary or alternative tool for dispute resolution.

To integrate these perspectives, it is crucial to recognize the broader notions underpinning international tax dispute resolution. While MAP is a widely accepted mechanism its effectiveness varies significantly across jurisdictions, often hindered by procedural delays, resource constraints, and power imbalances between tax administrations. Arbitration, though more structured and enforceable, raises concerns for developing nations due to its costs, potential impartiality of arbitrators, and sovereignty considerations. Although mediation is the least explored option, its flexibility presents a unique opportunity to foster more cooperative solutions.

One critical but often overlooked dimension of tax dispute resolution is the behavioral aspect. The way in which disputes are resolved can significantly influence taxpayer perceptions of fairness and consequence, thus impacting voluntary compliance. The effectiveness of any dispute resolution mechanism is dependent on trust, procedural transparency, and the accessibility of remedies for those involved.

As the conversations on international tax proposals continue to evolve, it is imperative that dispute resolution mechanisms are included in the proposals. This document seeks to contribute to the ongoing discourse by analyzing existing practices, identifying emerging challenges, and exploring innovative approaches to tax dispute resolution. By doing so, it aims to provide varied insights for policymakers, tax administrators, and practitioners navigating the complexities of international tax disputes.

This document is a precursor to the Maturity Model for Dispute Prevention and Resolution, which was prepared by the Inter-American Center of Tax Administrations (CIAT) with the support of the EUROsociAL+ Program and the Inter-American Development Bank (IDB). The Maturity Model analyzes the capacity of tax administrations to prevent and resolve tax disputes in both domestic and international fields. It aims to identify opportunities for improvement, assist in defining priorities, and highlight good practices of the tax administration. For more information on this initiative, contact the International Cooperation and Taxation Directorate of CIAT.

Part 1

Contemporaneous Debates for MAP Regulations in Developing Countries (Focus on the Colombian Experience)

Natalia Quiñones

Introduction

International tax dispute resolution has become increasingly important with globalization and the expansion of the tax treaty network in the developing world. The presence of double taxation, unintended non-taxation, and taxation not in accordance with existing tax treaties has become a priority for MNE’s, who have repeatedly asked for greater tax certainty since the OECD BEPS Project was launched.

As a response to this situation, the OECD BEPS Action 14 report established a minimum standard for the members of the Inclusive Framework (145 members as of November, 20231) in tax treaty dispute resolution. Along with the new standard, the OECD created the FTA MAP Forum, a system in charge of conducting peer-review assessments on the compliance with the minimum standard by all participating jurisdictions. Recognizing the need to improve dispute resolution in a time of increasing complexity in the international tax rules2, the OECD Inclusive Framework countries adopted a peer-review methodology in 2016 and committed to revealing public MAP statistics on a yearly basis.

An important portion of the peer-review elements that reflect the minimum standard are dependent on the ratification of the BEPS Multi-Lateral Instrument (MLI) or the bilateral renegotiation of existing treaties. This may be difficult given the political uncertainties associated with parliamentary ratification times and the renegotiation with partners that have not signed or ratified the MLI. However, it is only necessary to attempt renegotiation in these cases and to inform on the status, and to introduce the MLI for parliamentary ratification and, again, inform on the status to the peer review team.

Many developing countries are thus facing the challenge of implementing the minimum standard and, in some cases, of aligning internal regulations with some or all of the 12 best practices identified in the peer review documents of BEPS Action 14 on More Effective Dispute Resolution Mechanisms3. This process is fairly new in many jurisdictions, which is why drafting new MAP regulations and updating treaty practice requires making several decisions regarding the implementation of these standards. This chapter will examine some of the debates that developing countries may face in the process of updating or implementing MAP regulations in compliance with the BEPS Action 14 minimum standard.

1.1. General Policy Orientation

The BEPS Action 14 Minimum Standard and the peer review process are a golden opportunity for developing countries participating in the BEPS Inclusive Framework to develop a country policy regarding dispute resolution. In particular, countries must consider whether they desire to include tax treaty dispute resolution as an element to increase their competitiveness. Given the impact of the Pillar 2 agreement and the GloBE design3, the possibility of attracting investments with tax incentives or low rates has been significantly reduced. With this new panorama, the importance of tax certainty for MNEs has increased dramatically, and it may well become an important element in the choice of jurisdictions given that the mobility of capital investments continues to be a defining aspect of a globalized economy.

Nonetheless, developing countries may be concerned about widening the scope of a mechanism in which they have limited experience, especially in the cases in which the government lacks financial and trained human resources with enough time to perform these functions. It seems thus necessary to consider if the design of the MAP proceedings and, more generally, of international tax dispute mechanisms in the country will offer the minimum standard or will strive to offer greater certainty in order to attract investment.

1.2. Resources and Assigning the MAP Function

The first decision that tax administrations and governments face has to do with the human and financial resources necessary not just to update the system but also to ensure that the minimum standard is met and that the country’s interests are properly represented in the MAP proceedings. Anytime that regulatory or legal changes are identified as necessary to comply with the minimum standard, it is ideal to ensemble a team that will include officials in charge of the drafting and approval of the required legislation or regulations, as well as the actual officials that will oversee implementing said legislation and regulations.

At this point, as governments are required to guarantee sufficient funding for the MAP function4, it is recommended that an analysis is made to define if the function shall be located within the ministry or in the tax administration. The decision has financial implications, as the chosen dependency will have to provide trained officials with enough time to study and resolve MAP cases, as well as travel and translation costs.

The Terms of Reference provide in Section C.4 that the MAP staff should be independent of the personnel who made the adjustments and not be influenced “by considerations of the policy that the jurisdictions would like to see reflected in future amendments to the treaty.”5Furthermore, Element C.5 states that performance-based compensation for the MAP Competent Authority cannot be based on revenue obtained or maintained in MAP. This seems to suggest that there should be an independent MAP team separate from the treaty and transfer pricing audit teams, and separate from the treaty negotiating team, with key performance indicators based on resolution times rather than on revenue. However, the caseload for MAP in developing countries is still limited and the number of trained officials with an expertise in transfer pricing and treaties is reduced. In these cases, it is justifiable to assign the MAP function to the officials that are already in charge of treaty negotiations6. In all cases, it is advisable to include officials that have experience in transfer pricing, attribution of profits to permanent establishments, and general treaty knowledge. Given this mix, it is also advisable to include the APA function in the same team, as was the choice taken by Colombia in Article 12 of the Decree 1742 of 2020.

1.3. Legal and Regulatory Faculties

The minimum standard requires that competent authorities in charge of the MAP function have a series of legal and administrative powers that, in many cases, must be granted by the law itself. These empowerments must be carefully reviewed, as sometimes the lack of MAP cases has made it unnecessary to establish the powers conferred to competent authorities in treaties in force. In the case of Colombia, for example, the power to implement MAP agreements regardless of the statute of limitations and domestic time limitations7 had to be explicitly contemplated in the law, and thus required a legal reform8. On this specific point, it is necessary to conduct a thorough review of the country’s existing treaties, as this legal modification is required whenever the treaty accepts adjustments without a specific time limitation.