Number of Double Taxation Dispute Resolutions Through MAP in 2021 Increased by 13%

JAKARTA. The Organisation for Economic Co-operation and Development (OECD) recorded that the number of cross-jurisdictional double taxation dispute settlements through the Mutual Agreement Procedure (MAP), rose 13% in 2021 compared to 2020.

MAP is a procedure for mutual consent between tax authorities to resolve international tax disputes arising in the application of the Double Taxation Avoidance Agreement (P3B) or tax treaty, including those related to the adjustment of transfer pricing

Read: Understanding the Arm's Length Principles and the Consequences in Transfer Pricing

This was revealed in the Mutual Agreement Statistics which was released on Tuesday (22/11). "These statistics are part of the minimum standard of Based Erosion Profit Shifting (BEPS) action 14," the OECD's explanatory excerpt of the MAS launch, as stated in its written statement.

The report contains all MAP cases covering 127 jurisdictions worldwide. In detail, the number of MAPs completed consisted of transfer pricing cases which increased by 22%, and other cases which rose by 7%.

Read: The Mutual Agreement Procedure Breaks the Deadlock of Double Taxation Disputes

Although the number of dispute resolutions is increasing, according to the OECD the number of new MAP cases filed in 2021 is down 3% compared to 2020. The decline mainly occurred in the case of transfer pricing, which was minus 10.5%. Meanwhile, the number of other cases opened in 2021 rose by almost 4% from 2020.

The report also stated that the time needed to resolve the MAP case was recorded to be longer than the previous year. This is because several jurisdictions have postponed MAP due to complex cases.

In addition, the Covid-19 pandemic has also affected the quality of communication between the parties to the agreement.

Nevertheless, the OECD said in general the MAP process ended positively. Of these, 75% of MAP can be completed properly and only 2% of it is closed without an agreement.