Overall, it is clear that the MLI extends taxpayer access both by extending the period during which taxpayers must initiate a MAGP to three years and by giving the competent authorities an effective two-year period to settle a case (after which it can be arbitrated). The MLI has led to greater consistency of approach on some key issues such as arbitration and, more importantly, to a single MAP article for covered tax treaties. The friendly procedure can be used in situations where double taxation needs to be eliminated. Double taxation means that the income received from a natural or legal person has been taxed by the tax authorities of his country of residence as well as by the tax authorities of another country. Some would argue that the advantage of arbitration is that the existence of this mechanism provides an incentive for member States to settle disputes before the expiry of the two-year period, which would be a success rather than a failure of the Convention. However, statistics also show that 202 cases had exceeded the two-year period, although it was waived with the taxpayer`s consent. This suggests that taxpayers do not always consider the arbitration available to them under the Convention as a desirable means of resolving double taxation. In particular, Article 19 of the MLI stipulates that binding arbitration must take place if the competent authorities fail to reach an agreement on the settlement of a case within two years of the commencement of a case. This removes an important limitation in MAP cases in the past, as the competent authorities were only obliged to seek to settle cases, disputes could remain unresolved indefinitely.
Article 19 ensures that contractual disputes will be resolved within a certain period of time, making POPs a more attractive option for taxpayers. In addition, articles 20 to 25 specify how arbitration proceedings are to be conducted in practice. In the past, it was often practical limitations or a lack of agreement on how to proceed that blocked the solution. The friendly procedure (POP) remains the most widely used and best way to eliminate double taxation. Improving the effective functioning of POPs through various instruments has been of interest to the OECD and the EU for more than two decades. After BEPS, the incidence of double taxation increases and the number of POPs continues to increase. There is a growing emphasis on improving dispute settlement techniques in order to eliminate double taxation more effectively. This article describes some of the features of the tools now available. The mutual agreement procedure is a proven means by which tax administrations consult each other to settle disputes relating to the application of double taxation treaties.
This procedure, described and approved in Article 25 of the OECD Model Convention, can be used to eliminate double taxation that could result from a transfer pricing adjustment. Even if arbitration is requested, the EU review revealed that there may be many shortcomings in the system, including the delay or absence of the creation of the Advisory Committee and the lack of agreement on the appointment of the Chair of the Advisory Committee, which delays or prevents the process. .