Mutual Agreement Procedure Eyadmin
Within the EU, the EU Arbitration Convention came into force on 1 January 1995 as an instrument that promised to allow the elimination of double taxation between Member States. It is important that it provides for a binding and binding arbitration mechanism that eliminates double taxation, with the advice of an independent advisory body, if the competent authorities fail to reach an agreement after two years. This went beyond the existing bilateral agreements at the time, which simply required the competent authorities to make their “best efforts” to eliminate double taxation. Prescription period and negotiations that do not lead to an agreement The following conditions may lead to disagreement on POPs: the Indonesian Ministry of Finance (MOF) has adopted Regulation 49/PMK.03/2019 (PMK-49), which contains guidelines for the implementation of the Mutual Agreement Procedure (POP). PMK-49 is expected to implement the minimum standards contained in Action 14 of the OECD`s BEPS2 1 project in Indonesia. PmK-49 came into force on April 26, 2019 and proposes specific procedures and timetables for the application of POPs. The PMK-49 also includes procedures for a subject to request the withdrawal of the POP application. The DGT may, in certain circumstances, reject an application for revocation. In particular, Article 19 of the compulsory arbitration procedure must be mandatory if the competent authorities are unable to reach an agreement on the settlement of a case within two years of their start.
This is a significant restriction on POPs cases in the past, as the competent authorities were only required to try to resolve cases and disputes could be resolved indefinitely. Section 19 ensures that treaty disputes will be resolved within a specified time frame, making the MAP a more attractive option for taxpayers. In addition, sections 20 to 25 provide for the practical functioning of arbitration. In the past, it was often practical constraints or a lack of agreement on how to proceed that blocked the solution. Some might argue that arbitration has the advantage of encouraging Member States to settle disputes before the two-year deadline expires, which would be a success rather than a failure of the convention. However, statistics also show that 202 cases had exceeded the two-year deadline, while it had been cancelled with the taxpayer`s consent. This indicates that taxpayers do not always view the arbitration available to them under the agreement as a desirable means of resolving double taxation. There are clear and often long delays in applying for the POP.
In particular, Article 16, paragraph 1, second sentence, provides that the MAP case must be brought within a specified period of time, i.e. less than three years from the first notification of the tax measure, and not in accordance with the provisions of a secure tax treaty.