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Executive summary

On 22 November 2021, the Organisation for Economic Co-operation and Development (OECD) held its third OECD Tax Certainty Day.¹ During the event, the OECD released the 2020 statistics on Mutual Agreement Procedures (MAP) and presented the 2020 MAP awards.

For 2020, the statistics include information from all members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) that joined the Inclusive Framework prior to 2021 and have submitted their MAP statistics² for a total of 118 jurisdictions,³ an increase from the 105 jurisdictions covered in 2019 data. The 2020 data covers almost all MAP cases worldwide. Separate statistics are provided for transfer pricing cases and for “other” cases (i.e., non-transfer pricing cases) for 2020 with respect to the:

• Opening inventory and ending inventory of MAP cases

• Number of new MAP cases started

• Number of MAP cases completed

• Cases closed or withdrawn

• Average cycle time for cases completed, closed or withdrawn

The 2020 MAP statistics include the number of MAP cases that each jurisdiction has with each of its treaty partners. Moreover, each reporting jurisdiction’s performance with respect to key indicators for each type of case can be compared through an interactive tool.

In addition, at the event, the OECD announced the 2020 MAP awards recognizing the particular efforts of competent authorities across a range of metrics. This year, a new category (most improved jurisdiction) was introduced to recognize the jurisdiction that has the greatest increase in cases closed with unilateral relief or full agreement.

Detailed discussion

Background

In October 2015, the OECD released final reports on all 15 focus areas in its BEPS Action Plan. Among the various BEPS reports was the final report on Action 14: Making Dispute Resolution Mechanisms More Effective (the Action 14 Report).⁴ Improving dispute resolution mechanisms is an integral part of the work on BEPS. The measures developed under BEPS Action 14 and contained in the Action 14 Report are designed to reduce the risks of uncertainty and unintended double taxation by ensuring the consistent and appropriate application of tax treaties, including the effective and timely resolution of MAP disputes.

The Action 14 Report reflects agreement by jurisdictions to a minimum standard with respect to the resolution of treaty-related disputes. One element of the minimum standard requires jurisdictions to seek to resolve MAP cases within an average timeframe of 24 months.

Since 2006, the OECD has been compiling annual statistics on the MAP caseloads of all member countries and of partner economies that agreed to provide such statistics. Beginning with reporting period 2016, members of the Inclusive Framework have been reporting their MAP statistics pursuant to an agreed reporting framework.⁵

In November 2017, the OECD released the 2016 MAP statistics, following the agreed reporting framework and covering 65 jurisdictions.⁶ In October 2018, it released the 2017 MAP statistics, covering 87 jurisdictions.⁷ Following, in September 2019, it released the 2018 MAP statistics, covering 89 jurisdictions⁸ and in November 2020, it released the 2019 MAP statistics, covering 105 jurisdictions.⁹

The 2020 MAP statistics

The 2020 MAP statistics include 16 additional jurisdictions that were not included in 2019: Albania, Armenia, Cabo Verde, Dominica, Eswatini, Grenada, Honduras, Jersey, Maldives, Namibia, North Macedonia, Paraguay, Saint Lucia, Saint Vincent and the Grenadines, San Marino, and Sri Lanka. Three jurisdictions (Belize, Cote d’Ivoire, Jordan) that were included in the 2019 MAP statistics did not provide information for 2020 and that is why they are not included in the 2020 MAP statistics. Further, the 2020 MAP statistics identify all the members of the Inclusive Framework that have not submitted their 2020 MAP statistics yet.¹⁰

The agreed reporting framework makes a distinction between transfer pricing and “other” cases. A transfer pricing MAP case relates to either the attribution of profits to a permanent establishment or the determination of profits between associated enterprises. Any MAP case that is not a transfer pricing MAP case is considered an “other” MAP case. In the MAP statistics reporting framework, a further distinction is made between cases received before 1 January 2016 and cases received on or after such date. For the jurisdictions that joined the Inclusive Framework after 31 December 2016, the distinction is made between the cases received before 1 January of the year the jurisdiction joined the Inclusive Framework and cases received on or after such date.

The OECD has also updated its interactive tool that allows users to make a comparison of the covered jurisdictions’ performance in 2020 for each type of case (i.e., transfer pricing or “other” cases). The comparison is based on seven key indicators: starting inventory, cases started, cases closed, ending inventory, time (in months), closing ratio¹¹ and the portion of pre-2016 (or pre-Inclusive Framework membership) cases in ending inventory. Users may customize their search by filtering among the indicators and selecting groups of jurisdictions.

MAP inventories and cases closed

Looking at the statistics for all MAP cases (both transfer pricing and "other” cases, as well as both cases received prior to 1 January 2016 (or 1 January of the year of joining the Inclusive Framework) and cases received on or after such date, there have been decreases in the starting inventory, ending inventory and cases closed:

• The starting inventory of all MAP cases decreased approximately 10% between 2019 and 2020, from 7,086 to 6,348 cases.

• The ending inventory of all cases also decreased approximately 7% during this period, from 6,955 to 6,478.

• The number of all cases closed decreased nearly 16% between 2019 and 2020, from 2,821 to 2,378.

Looking exclusively at pre-2016 (or the period prior to 1 January of the year of joining the Inclusive Framework) cases, there have been reductions in both the starting inventory and cases closed:

• The starting inventory of such cases fell almost 28% between 2019 and 2020, from 3,365 to 2,449.

• The number of such cases closed fell by more than 30% between 2019 and 2020, from 934 to 653.

Looking just at post-2016 (or the period on or after 1 January of the year of joining the Inclusive Framework) cases, there has been an increase in the starting inventory and a decrease in the cases closed:

• The starting inventory of such cases increased by almost 5% between 2019 and 2020, from 3,721 to 3,899 cases.

• The number of such cases closed has decreased by almost 9% between 2019 and 2020, from 1,887 to 1,725.

The annex of this Alert includes summary tables with an overview of the 2016, 2017, 2018, and 2019 MAP statistics.

MAP cases started during 2020

The statistics shows that 2,508 MAP cases were started on or after 1 January 2020. This number decreased almost 7% in comparison to 2019 data, from 2,690 to 2,508 cases.

The three tables below present the five reporting jurisdictions with the highest number of MAP cases started in 2020, on an overall basis and for each category of cases, transfer pricing and “other”:

In contrast, the three tables below present the five G20 jurisdictions with the lowest number of MAP cases started in 2020, on an overall basis and for each of the categories of cases:

MAP cases closed in 2020

The number of cases reported as closed in 2020 is 2,378, an almost 16% decrease relative to the 2019 figures, from 2,821 to 2,378.

The three tables below present the five reporting jurisdictions closing the highest number of cases in 2020, on an overall basis and for each of the categories of cases:

According to the statistics, of the MAP cases closed in 2020, 75% successfully resolved the issue under dispute. Of that 75%:

• 51% of cases closed were concluded with an agreement fully resolving the taxation not in accordance with the tax treaty

• 1% were resolved with an agreement partially resolving the taxation not in accordance with the tax treaty

• 16% were resolved with a grant of unilateral relief

• 7% were resolved via domestic remedy

For 1% of the MAP cases closed, the parties agreed that there was no taxation not in accordance with the tax treaty. Of the 24% of cases closed that did not resolve the issue, 11% were withdrawn by taxpayers while 13% were not resolved for various reasons (including because there was no agreement between the competent authorities).

Average cycle time for cases completed, closed or withdrawn

For transfer pricing cases, the average cycle time increased by 4 months between 2019 and 2020, from 31 months to 35 months. For other cases, the average cycle time decreased by 4 months between 2019 and 2020, from 22 months to 18 months.

Average times for resolution of MAP cases (both transfer pricing and other cases) varied significantly by jurisdiction, ranging from 0.5 months (Barbados) to almost 87 months (Morocco). For transfer pricing cases, the average time for resolution ranged from less than a month (e.g., Brazil, Greece, Turkey) to 63 months (India). For other cases, the average time for resolution ranged from almost two months (Curacao) to 105 months (Bulgaria).

The 2020 MAP awards

The OECD gave recognition to the particular efforts of competent authorities in several different areas:

• Category 1: Average time to close MAP cases (eligible for the award for transfer pricing cases were jurisdictions that closed more than 50 transfer pricing cases in 2020 and for other cases, jurisdictions that closed more than 20 other cases in 2020). Switzerland won for the shortest time (20 months) in closing transfer pricing cases and Australia (approximately 6 months) won for other cases

• Category 2: Age of Inventory (eligible for award were jurisdictions with more than 100 cases left in 2020 ending inventory). Spain won for the smallest proportion (5.6%) of pre-2016 cases in ending inventory

• Category 3 - Caseload Management (eligible for the large inventory award were jurisdictions with more than 100 cases left in 2020 ending inventory and for the medium inventory award jurisdictions with more than 20 cases but fewer than 100 cases left in 2020 ending inventory). Luxembourg (approximately 68%) and Norway (61%) won for the most effective caseload management

• Category 4 - Cooperation (for transfer pricing cases, eligible for award were pairs of jurisdictions with more than 20 transfer pricing cases to resolve in 2020 and for other cases, pairs of jurisdictions with more than 20 other MAP cases to resolve in 2020). Italy-Spain won the collaborative award for the pairings of jurisdictions that dealt most effectively with their joint caseload for transfer pricing cases and Norway-Sweden for “other” cases

• Category 5 – Most improved jurisdiction (eligible for award was the jurisdiction with the greatest increase in cases closed with unilateral relief or full agreement between 2020 and 2019, with an increase for both transfer pricing and other cases). Ireland won with an increase of 27 cases closed with unilateral relief or full agreement in 2020 compared to 2019 (increase of 5 for transfer pricing cases and increase of 22 for other cases).

Implications

The OECD’s MAP statistics post-2016 show a trend of starting and ending inventories of MAP cases continuing to increase in the majority of jurisdictions tracked. While MAP can be an effective tool to reduce double taxation, multinational businesses may want to also consider alternative tools available, such as the use of bilateral and multilateral Advance Pricing Agreements, joint or simultaneous tax audits, or processes such as the OECD’s International Compliance Assurance Programme.

Where multinational businesses experience issues with MAP in a specific jurisdiction – including, in particular, the lack of access to MAP – they should consider making these issues known to the OECD as part of its review process.

According to the 2021 EY International Tax and Transfer Pricing survey report, the risk of controversy is on the rise and more companies are seeking assurance to reduce their risks and avoid double taxation. The report also notes that businesses with the largest transfer pricing departments (30 or more dedicated people) said the number one trend they see in the marketplace is significant improvement in transfer pricing dispute resolution processes. Among smaller departments, this trend was ranked lower.

It is expected that the importance of MAP will increase for the foreseeable future as a result of a convergence of trends that include the ongoing focus of tax authorities on cross-border transactions, the weakness of national fiscal conditions as a result of the COVID-19 pandemic and the government spend on relief and stimulus measures, and the increasingly multilateral approach being taken by many tax authorities.

ANNEX – MAP statistics 2017, 2018, 2019, and 2020 combined

_______________________________

For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, Rotterdam

• Marlies de Ruiter | marlies.de.ruiter@nl.ey.com

• Maikel Evers | maikel.evers@nl.ey.com

• Ronald van den Brekel | ronald.van.den.brekel@nl.ey.com

Ernst & Young Belastingadviseurs LLP, Amsterdam

• David Corredor Velasquez | david.corredor.velasquez@nl.ey.com

• Konstantina Tsilimigka | konstantina.tsilimigka@nl.ey.com

• Roberto Aviles Gutierrez | roberto.aviles.gutierrez@nl.ey.com

Ernst & Young Limited (New Zealand), Auckland

• Matt Andrew | matt.andrew@nz.ey.com

Ernst & Young Solutions LLP, Singapore

• Luis Coronado | luis.coronado@sg.ey.com

Ernst & Young LLP (United Kingdom), Global Tax Desk Network, London

• Joel Cooper | joel.cooper@uk.ey.com

Ernst & Young LLP (United States), Global Tax Desk Network, New York

• Jose A. (Jano) Bustos | joseantonio.bustos@ey.com

Ernst & Young LLP (United States), Washington, DC

• Barbara M. Angus | barbara.angus@ey.com

_______________________________

Endnotes

1. The replay is available here: https://www.oecd.org/tax/administration/oecd-tax-certainty-day.htm.

2. The following jurisdictions were members of the inclusive framework in 2020 but have not submitted their 2020 MAP statistics: Anguilla, Antigua and Barbuda, Belize, Benin, Botswana, Burkina Faso, Cameroon, Congo, Côte d'Ivoire, Democratic Republic of the Congo, Djibouti, Egypt, Gabon, Haiti, Jamaica, Jordan, Montenegro, Montserrat, and Sierra Leone.

3. Albania, Andorra, Angola, Argentina, Armenia, Aruba, Australia, Austria, Bahamas Bahrain, Barbados, Belgium, Bermuda, Bosnia and Herzegovina, Brazil, British Virgin Islands, Brunei Darussalam, Bulgaria, Cabo Verde, Canada, Cayman Islands, Chile, China (People's Republic of), Colombia, Cook Islands, Costa Rica, Croatia, Curaçao, Czech Republic, Denmark, Dominica, Dominican Republic, Estonia, Eswatini, Faroe Islands, Finland, France, Georgia, Germany, Gibraltar, Greece, Greenland, Grenada, Guernsey, Honduras, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan, Kenya, Korea, Latvia, Liberia, Liechtenstein, Lithuania, Luxembourg, Macau, Malaysia, Maldives, Malta, Mauritius, Mexico, Monaco, Mongolia, Morocco, Namibia, Netherlands, New Zealand, Nigeria, North Macedonia, Norway, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Poland, Portugal, Qatar, Romania, Russian Federation, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, San Marino, Saudi Arabia, Senegal, Serbia, Seychelles, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turks and Caicos Islands, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Vietnam, Zambia. 

4. See EY Global Tax Alert, OECD releases final report on improving the effectiveness of dispute resolution mechanisms under Action 14, dated 8 October 2015.

5. Ibid.

6. See EY Global Tax Alert, OECD releases mutual agreement procedure statistics for 2016, dated 1 December 2017.

7. See EY Global Tax Alert, OECD releases 2017 Mutual Agreement Procedure statistics, dated 23 October 2018.

8. See EY Global Tax Alert, OECD holds first Tax Certainty Day and releases 2018 Mutual Agreement Procedure statistics, dated 20 September 2019.

9. See EY Global Tax Alert, OECD releases 2019 mutual agreement procedure statistics and 2019 mutual agreement procedure awards, dated 24 November 2020.

10. Anguilla, Antigua and Barbuda, Belize, Benin, Botswana, Burkina Faso, Cameroon, Congo, Côte d'Ivoire, Democratic Republic of the Congo, Djibouti, Egypt, Gabon, Haiti, Jamaica, Jordan, Montenegro, Montserrat, and Sierra Leone.

11. The closing ratio is the ratio of MAP cases closed by the jurisdiction over its total MAP caseload, where the total MAP caseload is the sum of: (i) the number of MAP cases in inventory at the beginning of the year; and (ii) the number of MAP cases that started during the year. To take into consideration the fact that the MAP cases started during the year did not start on the exact same date and may have started during the first or the second semester, the latter number is divided by 2. This also explains why the closing ratio may be higher than 100% for some jurisdictions.