Mutual Agreement Procedure (MAP) in the UAE: A Comprehensive Guide

Cross-Border Tax Issues in the UAE are guided by a clear process to help in their resolution under the Mutual Agreement Procedure (MAP) of the UAE Ministry of Finance, issued on 7 January 2021. The procedure provides for the competent authorities of two countries to cooperate in arriving at a solution concerning such matters arising under a double taxation treaty, where it is found that one or both countries are taxing in such a way that the agreement is not being adhered to. The UAE, with over 130 tax treaties, follows the MAP framework from Article 25 of the United Nations and OECD Model Tax Conventions.

MAP also contributes to the OECD’s goal under BEPS Action 14 regarding more efficient tax dispute resolution and Double Taxation Avoidance. Thus, the procedure provides UAE businesses and individuals with an easy way of addressing, for instance, transfer pricing and digital services taxation, as well as dual residency of tax residents in an easy manner to deal with cross border tax disputes.

What is the Mutual Agreement Procedure (MAP)?

Mutual Agreement Procedure (MAP) provides a procedure to settle Cross-Border Tax Issues such as disputes related to tax treaties. Under the MAP, Competent Authorities interact with each other to settle the tax disputes arising pursuant to a double tax treaty where actions of one or both contracting states result in taxation not in accordance with the treaty.

The essence of such a procedure is the double taxation avoidance and conflicting tax treatments by the countries concerned. In the UAE, it is regulated by the provisions of the UAE’s Double Tax Treaties and follows the standards of the Organisation for Economic Co-operation and Development (OECD) and the United Nations.

The MAP seeks a fair solution for both individuals and corporations that may face tax disputes due to double taxation or any other inconsistency in tax. This allows UAE-based taxpayers facing international tax disputes to seek relief by directly allowing tax authorities of the countries involved to arrive at a mutual agreement.

Why Choose MAP in the UAE?

• Effective Solution: The MAP provides a clear procedure for resolving disputes concerning the application of tax treaties, with the primary aim of achieving a fair and timely resolution.
• Prevention of Double Taxation: While effecting solutions, the MAP prevents double taxation—a condition that financially burdens many taxpayers.
• International Compliance: MAP provides a basis upon which the UAE can achieve conformance with international norms of tax dispute resolution set forth by the OECD and the UN Model Double Taxation Convention.

Eligibility for MAP in the UAE

The following constitute the eligibility conditions of MAP:

1. Tax Treaty: There shall be a tax treaty between the UAE and the relevant country concerned.
2. Tax Dispute: The dispute shall be with regard to the interpretation or application of the Tax Treaty.
3. Notification: The taxpayer shall notify the competent authority within the time limit provided under the treaty.

Steps to Apply for MAP in the UAE

1. Filing the MAP Request Timely: A qualifying person has to forward the request for a MAP to the competent authority of the UAE, usually the Ministry of Finance. Such a request has to be submitted within the relevant time limit provided under the concerned tax treaty, usually within three years from the first notification of the action giving rise to the request.
2. Preliminary Review and Notification: The application is checked by the UAE competent authority to determine if it meets all the formalities. A response will be sent to the qualifying person within 30 days of whether the application has been accepted or additional information is needed.
3. Consultation with the Other Jurisdiction: In case of denial of the MAP request, the UAE authority will consult the competent authority of the other jurisdiction. They will share reasons for denial and request feedback from the competent authority of the other jurisdiction.
4. MAP Consultation and Negotiation: Once accepted, the UAE authority enters into a formal consultation by preparing a position paper indicating why such actions may result in taxation not in consistency with the tax treaty. Authorities of both jurisdictions then negotiate and reach an agreement.
5. Resolution or Closure of the MAP: If an agreement is reached by the competent authorities, the UAE competent authority informs the terms to the qualifying person who may either accept or reject them. In case no agreement is reached, the MAP process is closed as unresolved, and the UAE competent authority will also inform the qualifying person.

Importance of Mutual Agreement Procedure (MAP) in UAE

In the context of the UAE, the mutual agreement procedure is absolutely important, given the global business environment and the wide network of double-tax treaties the country has entered into. The key importance of MAP include:

1. Avoidance of Double Taxation: It helps solve cases of double taxation where the same income is taxed in the two countries.
2. Reduces Compliance Burden: The negotiation between the tax authorities under MAP will reduce the need for lengthy litigation.
3. Encouraging Fairness in International Taxation: MAP aligns with the UAE’s policy of ensuring fair and equitable tax levying for businesses and individuals across borders.
4. Compliance with Global Standards: The UAE’s participation in MAP underlines its commitment to follow international standards set out by the OECD with respect to taxation.

Frequently Asked Questions (FAQs)

Q1. What are the time limits for filing a MAP request? 

The time limit for filing a MAP request is included in the tax treaty between the UAE and the concerned country.

Q2. Can the taxpayer file a MAP without a tax dispute? 

No, a MAP can be submitted only if the taxpayer has entered a tax dispute over the interpretation or application of a tax treaty.

Q3. What if the competent authorities cannot agree? 

If the competent authorities cannot agree, the taxpayer can avail themselves of other legal remedies provided by domestic law.

How HHS Lawyers Can Assist You

HHS Lawyers has established experience and knowledge in advising and assisting professionally in the UAE on the Mutual Agreement Procedure. Our team of experienced lawyers will support and assist our clients through the MAP process for the effective and fair resolution of the tax dispute. Our scope of legal services ranges from the preparation of documents to the submission of the application to representation in discussions with the competent authority.

Contact HHS Lawyers Today for Tax-Dispute Consultation. Don’t let tax disputes obstruct your way. Let HHS Lawyers assist you with professional legal services to make this process as smooth and easy to handle for you as possible. Reach out today to discuss your legal needs and learn how we can best help you attain a positive case outcome.