The mutual unification process is a proven way of consulting with tax authorities to resolve disputes over the application of double taxation agreements. This procedure, described and approved in Article 25 of the OECD Model Convention, can be used to eliminate the double taxation that could result from an adjustment in transfer prices. Under the POP, the appropriate authorities are only required to exercise due diligence. If states fail to reach an agreement, the mutual agreement process will be closed without eliminating double taxation. In this case, the situation of the subject is settled in each state. In the international tax system, the Mutual Agreement (MAP) procedure – in Australia`s tax treaties – supports a resilient global economy and stimulates economic growth. The legal basis for a mutual agreement procedure is the DBA concerned. Germany has concluded DBA with more than 90 countries in the world. Most of these DBAs follow the OECD`s draft international agreement. The provisions on mutual agreement procedures are set out in Article 25 of the OECD Model Convention.
Recent ABA often contains provisions that prescribe arbitration through an unsuccessful mutual agreement procedure. The mutual agreement reached becomes binding only if the subject approves it in writing, waives the right of appeal and withdraws all pending appeals. The Arbitration Convention of the European Union (EU) establishes a procedure for settling transfer pricing disputes for EU member states. This procedure may apply in cases of double taxation between companies in different EU Member States. A proposal for adjustment in the case of an adversarial adjustment procedure When measures by one or more countries lead to a non-DBA tax (particularly in the area of double taxation), the subject concerned may request a procedure of mutual agreement. In Germany, the Bundeszentralamt for Steuern (BZSt) is responsible for the implementation of these procedures. If all the conditions are met, the countries concerned try to resolve the tax dispute by mutual agreement. This will generally avoid double taxation. Subjects who believe that their imposition is contrary to a DBA or the European Arbitration Convention may request a procedure of mutual agreement. In Germany, the Bundeszentralamt for Steuern (BZSt) is responsible for the implementation of these procedures. Applications for mutual agreement proceedings can therefore be filed directly with the BZSt.
As a general rule, non-German resident applicants must submit these applications to the competent authority of their country of residence. Article 25 contains three distinct areas in which the mutual agreement procedure is generally applied. Requests to open a procedure for mutual agreement under a DBA or the European Arbitration Agreement can be addressed to the BZSt at the following address: letter from BMF of 9 October 2018, leaflet relating to international mutual agreement and arbitration on income and property taxes. This notice replaces the notice of July 13, 2006 – IV B 6-S 1300-340/06 -, BStBl I 2006, p. 461. The provisions of the letter of BMF of 5 April 2017 – IV B 5 – S 1304/0-04 – BBl I 2017, 707 are contained in paragraph 5 of the notice of 9 October 2018.