March 8, 2021
OECD releases Qatar Stage 1 peer review report on implementation of Action 14 minimum standard
On 16 February 2021, the Organisation for Economic Co-operation and Development (OECD) released the 10th batch of peer review reports relating to the implementation of the Base Erosion and Profit Shifting (BEPS) minimum standard under Action 14 on improving tax dispute resolution mechanisms.1 Qatar was among the assessed jurisdictions in the 10th batch.2
Overall, the report concludes that Qatar meets the majority of the elements of the Action 14 Minimum Standard. In the next stage of the peer review process, Qatar’s efforts to address any shortcomings identified in its Stage 1 peer review report will be monitored.
In October 2016, the OECD released the peer review documents (i.e., the Terms of Reference and Assessment Methodology) on Action 14 on Making Dispute Resolution Mechanisms More Effective.3 The Terms of Reference translated the Action 14 minimum standard into 21 elements and the best practices into 12 items. The Assessment Methodology provided procedures for undertaking a peer review and monitoring in two stages. In Stage 1, a review is conducted of how a member of the Inclusive Framework (IF) on BEPS implements the minimum standard based on its legal framework for Mutual Agreement Procedure (MAP) and how it applies the framework in practice. In Stage 2, a review is conducted of the measures the member of the IF on BEPS takes to address any shortcomings identified in Stage 1 of the peer review.
Both of these stages are desk-based and are coordinated by the Secretariat of the Forum on Tax Administration’s (FTA) MAP Forum.4 In summary, Stage 1 consist of three steps or phases:
Input is provided through questionnaires completed by the assessed jurisdiction, peers (i.e., other members of the FTA MAP Forum) and taxpayers. Once the input has been gathered, the Secretariat prepares a draft Stage 1 peer review report of the assessed jurisdiction and sends it to the assessed jurisdiction for its written comments on the draft report. When a peer review report is finalized, it is sent for approval of the FTA MAP Forum and later to the OECD Committee on Fiscal Affairs’ to adopt the report for publication.
Minimum standard peer review reports
The report is divided into four parts, namely:
Each part addresses a different component of the minimum standard.
The report includes a number of recommendations relating to the minimum standard. In general, the performance of Qatar with regard to MAP has proven to be satisfactory. Overall, Qatar meets the majority of the elements of the Action 14 minimum standard.
Qatar, in principle, meets the Action 14 minimum standard concerning the prevention of disputes.
The majority of its tax treaties contain a provision equivalent to Article 25(3), first sentence, of the OECD Model Tax Convention (MTC), requiring their competent authority to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the tax treaty. The remaining treaties are expected to be modified either by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) or by bilateral negotiations.
Qatar is authorized to enter into bilateral Advance Pricing Arrangements (APAs) with States with which Qatar has signed a tax treaty including a provision that is equivalent to Article 25(3), first sentence of the MTC.
Qatar is able to provide for the roll-back of bilateral APAs in appropriate cases, where it has been verified that the relevant facts and circumstances in the earlier tax years are the same.
However, Qatar has not received any request for roll-back of a bilateral APA during the review period (i.e., 1 January 2017 to 31 December 2019).
Availability and access to MAP
Qatar meets some of the requirements regarding the availability and access to MAP under the Action 14 minimum standard.
The majority of its treaties contain a provision equivalent to Article 25(1), first sentence of the MTC allowing taxpayers to submit a MAP request to the competent authority of either treaty partner.
Almost 60% of its tax treaties contain a provision that is equivalent to Article 25(1), second sentence of the MTC, allowing taxpayers to submit a MAP request within a period of no less than three years from the first notification of the action resulting in taxation not in accordance with the provisions of the tax treaty.
The remaining treaties are expected to be modified either by the MLI or by bilateral negotiations.
Qatar indicated that it will introduce a documented bilateral consultation or notification process for those situations where its competent authority considers an objection raised in a MAP request as not being justified.
Additionally, Qatar reported that it will provide access to MAP in transfer pricing cases and in cases where the conditions for the application of a treaty anti-abuse provision have been met or where the application of a domestic law-abuse provision is in conflict with the provisions of a treaty. However, Qatar did not receive any MAP request for such cases during the review period.
The majority of its treaties contain a provision equivalent to Article 25(3), second sentence of the MTC, allowing their competent authorities to consult together for the elimination of double taxation in cases not provided for in their tax treaties. The remaining treaties are expected to be modified by the MLI or by bilateral negotiations.
Qatar reported that it provides access to MAP in all cases where taxpayers have complied with the information and documentation requirements as set out in its MAP guidance. It further reported that since 1 January 2017 it has not denied access to MAP for cases where the taxpayer had not provided the required information or documentation. As, according to the report, Qatar has thus far not limited access to MAP in eligible cases when taxpayers have complied with Qatar’s information and documentation requirements for MAP requests, the report states that it should continue this practice.
The MAP guidance is not yet published. Qatar indicated that it intends to introduce and publish guidance on access to and use of MAP, including the contact details of the competent authority in charge of MAP cases as well as the manner and form in which the taxpayer should submit its MAP request.
Resolution of MAP cases
Qatar meets all of the other requirements under the Action 14 minimum standard in relation to the resolution of MAP cases.
The Action 14 minimum standard recommends that jurisdictions aim to resolve MAP cases within an average time frame of 24 months.
The MAP statistics for Qatar for the period 2017 to 2019 shows that the average time needed for Qatar to close two other MAP cases during the Statistics Reporting Period (i.e., starting on 1 January 2017 and ending on 31 December 2019) was 18.61 months.
For the period starting on 1 January 2017 Qatar had one pending other MAP case. At the end of 31 December 2019 Qatar had 32 other MAP cases in its inventory.
Qatar indicated that it monitors the MAP caseload regularly to ensure that sufficient resources are dedicated to the competent authority function.
Implementation of MAP agreements
Qatar does not meet the Action 14 minimum standard as regards the implementation of MAP agreements as not all MAP agreements were implemented on a timely basis. Specifically, one MAP agreement was not implemented for all the years involved in a dispute in a timely manner.
Qatar is already working to address deficiencies identified in its peer review and will now move on to Stage 2 of the process, where Qatar’s efforts to address any shortcomings identified in its Stage 1 peer review report will be monitored. Under the peer review program methodology, Qatar shall submit an update report to the Forum on Tax Administration’s MAP Forum within one year of the OECD Committee on Fiscal Affairs’ adoption of the Stage 1 peer review report.
In a post-BEPS world, where multinational enterprises (MNEs) face tremendous pressures and scrutiny from tax authorities, the release of Qatar’s peer review report represents the continued recognition and importance of the need to achieve tax certainty related to cross-border transactions for MNEs. While increased scrutiny is expected to significantly increase the risk of double taxation, the fact that tax authorities may be subject to review by their peers should be seen by MNEs as a positive step to best ensure access to an effective and timely mutual agreement process.
Furthermore, the peer review for Qatar provides insights to taxpayers on the availability and efficacy of MAP. With additional countries continuing to be reviewed, the OECD has made it known that taxpayer input continues to be welcomed on an ongoing basis.
With stakeholder feedback in mind, businesses are encouraged to share their views with the OECD on the peer review for Qatar and any other jurisdictions, and to perhaps comment on whether the next iteration of the OECD’s assessment of tax administration’s MAP performance warrants greater feedback from taxpayers as the primary source. Feedback from the international tax community is the logical next step after peer review, which may help to further validate the current favorable result.
For additional information with respect to this Alert, please contact the following:
EY Consulting LLC, Doha