We have to agree with the authorities in the other country on the right taxation. Some cases can be resolved without the authorities of the other country being involved. As a result, multinational companies facing cross-border litigation are well advised to proactively consider the use of POPs (as well as other alternative dispute resolution mechanisms, such as bilateral advance price agreements – ASA) when available, while pursuing their options along the usual national channels. In addition, it is important to consider the impact of a national transaction agreement on the possibility of obtaining double taxation relief in the POP process at a later date. The internal resolution of disputes related to cross-border transactions may, in practice, limit the ability of the competent authority, on the other side of operations, to grant facilities for double taxation. This is mainly due to the fact that such comparisons restrict the negotiations of the competent authorities: the position agreed by the taxpayer with one tax authority may not be acceptable to others. For U.S.-based taxpayers, for example, a national comparison without POPs can be particularly damaging, as taxpayers must prove that they have exhausted all effective and practical remedies to challenge their taxes or that their foreign tax credits are being denied by U.S. tax authorities. In many countries, MAP is also used as a basis for the adoption of bilateral pre-price agreements (APAs). In this approach, taxpayers are taking proactive steps to obtain two countries` agreement on the transfer pricing regime they apply to their cross-border transactions.
In this context, a POP is used as an instrument to avoid transfer pricing disputes. POPs can be relied upon by a taxpayer to determine which country has the right to tax the taxpayer as a country of residence. In such cases, tax authorities may, under the POP, agree on the country where a dual-lived man is established for contractual purposes. This provision is important in determining which country has tax duties worldwide and which country can only be taxed if there is a cross-border source of income and to ensure that the resident country is subject to double taxation relief. For more information, please see our guide on procedures for simplifying double taxation and reciprocal agreements. In addition to these developments, the European Union has proposed a new directive on the mechanisms for resolving disputes on double taxation in the European Union, which aims to resolve cases of double taxation within the EU by mutual agreement between member states. This could become, when the time comes, another instrument that EU taxpayers will be able to access when the time comes.  Talk to one of the authors to discuss the possibility of applying for POPs in your country or to discuss your cross-border tax controversy strategy more generally. A mutual agreement procedure is a procedure by which the authorities of two countries can, at your request, agree on ways to avoid controls that do not comply with the tax treaty.
A map procedure can put pressure on the tax authorities with which taxpayers are in dispute, under pressure from another tax authority. Another tax authority on your side in any dispute can help you find an adequate solution to a dispute. Action 14 of the BEPS Action Plan aims, in particular, to improve the effectiveness of the Mutual Agreement Procedure (POP) in the settlement of contractual disputes and transfer pricing. Our double taxation agreements contain a provision called the mutual agreement procedure. This allows the subject to submit to the competent authority a tax administration of his arguments in favour of an exemption from the tax transfer. The procedure is also called a request for assistance from the relevant authorities. In most cases where assistance from the relevant authorities is required, it is a matter of adjusting the price of