Tax Alert – UAE Ministry of Finance Issues Guidance on Mutual Agreement Procedure (MAP)

The UAE Ministry of Finance (MoF) recently issued guidance on Mutual Agreement Procedure (MAP) to inform taxpayers about its purpose, the circumstances under which it can be applied, the required documentation for submitting a MAP request, and the procedural steps involved.

Background: What is MAP?

MAP is a tax dispute resolution mechanism available to taxpayers for resolving disputes potentially resulting in double taxation under the double tax agreements (‘DTA’) between two or more countries. A MAP can also be sought where there is an issue on application and/or technical interpretation of the relevant DTA. Internationally, MAP is frequently used to resolve transfer pricing disputes for cross border transactions.

Cases for which MAP applications can be filed:-

1. Transfer pricing adjustments or transfer pricing disputes involving two or more countries
2. Determination of existence of permanent establishment
3. Attribution of profits to permanent establishments whether admitted by the taxpayer or not
4. Dual residency conflicts
5. Interpretation issues of DTA
6. Conflicts in application of the GAAR provisions in UAE vis-à-vis anti-abuse provisions in the applicable DTA
7. Acceptance under MAP of self-initiated (‘suo moto’) transfer pricing adjustments for cross border transactions.

Role of competent authority and FTA

• Under the MAP provisions of the DTAs, the role of the UAE Competent Authority (UAE CA) is to seek the elimination of double taxation, rather than to re-audit the taxpayer. The UAE CA is represented by the International Tax Department within the Ministry of Finance (MoF), operating independently from the Federal Tax Authority (FTA).
• Dedicated FTA personnel, who are not involved in tax audits will collaborate with the UAE CA on MAP cases and will actively participate in the MAP process. The FTA shall also support the MAP process by implementing agreed outcomes and providing relevant documentation as needed.

Eligibility and process

• Eligibility - If taxpayers believe that actions by one or both contracting states result in taxation not in accordance with the DTA, as per some of the examples provided above, a MAP claim can be filed by the taxpayers with the UAE CA.
• Time limit to file MAP claims: MAP claims must generally be filed within three years from the first notification of the action causing the dispute under DTA. However, if a Taxpayer determines the probability of an issue under DTA, a MAP claim can still be filed.
• Domestic remedies: Taxpayers cannot pursue MAP and domestic legal remedies simultaneously. However, MAP claims can be filed while domestic remedies are still available to avoid time-bar issues.

Filing a MAP claim

Taxpayers must submit detailed information, including:

1. Taxpayer and related party details
2. Relevant DTA articles and interpretation
3. Fiscal years involved
4. Transfer pricing documentation (if applicable)
5. Correspondence with foreign tax authorities
6. Tax residency certificates and supporting evidence MAP claims should be submitted to: uaemap@mof.gov.ae

MoF has provided a detailed guidance on the information and documentation that should be submitted to file a MAP claim. However, since each issue can be unique, no standard form to file a MAP claim will be available to taxpayers.

Resolution process

• The UAE CA will first assess if a MAP claim is complete and justified and may resolve the issue independently and endeavor to provide a unilateral relief.
• If unilateral relief is not possible, the UAE CA will then commence bilateral negotiation with the foreign CA. Taxpayers will generally not be part of the negotiation process, however, at the discretion of the of the CAs, the Taxpayers may be invited to present the facts of the case. However, the UA CA will provide updates of the progress to the Taxpayers on completion of a significant milestone in the MAP process.
• Outcome: Taxpayers will be notified of the agreement and must confirm acceptance or rejection within one month.

Key takeaways

• Taxpayers should review DTAs, evaluate any potential conflicts under the DTA and evaluate if the case falls within the time limits prescribed under the UAE DTA, before initiating a MAP claim.
• Consider the interaction with domestic remedies to avoid conflicts.
• Once the taxpayer decides to proceed with filing a MAP claim, a comprehensive submission should be prepared. This documentation must thoroughly support the MAP claim and be submitted to the relevant Competent Authorities.
• Ensure timely, transparent, and consistent communication with the UAE CA throughout the process.

How we can help

Our transfer pricing and international tax team can assist you in:

• Conducting an assessment to identify potential issues under the applicable DTA and evaluate the possibility of obtaining relief through the MAP process.
• Once eligibility for a MAP claim is established, we assist in preparing comprehensive and well-supported documentation for submission to the Competent Authorities.
• We also provide support in coordinating and representing your case before foreign tax authorities to help achieve a favourable resolution under the MAP framework.

Contact us to learn how we can support you to navigate complex issues under DTA and help through the MAP process.