In November 2019, the OECD published the peer review of Brazil’s Mutual Agreement Procedures (MAP), which is a mechanism for tax treaties disputes resolution. Ten countries have offered their input on Brazil’s MAP: Austria, Belgium, China, France, Italy, Korea, Norway, Portugal, Sweden and Turkey. According to the report, in order to be fully compliant with all the OECD standards, Brazil needs to amend and update a significant number of its tax treaties.
The report is part of the BEPS Action 14, which seeks to improve the resolution of tax-related disputes between jurisdictions, increasing its efficiency and improving its timelines. In order to that, the Action consists of 21 elements and 12 practices, which assess a jurisdiction’s legal and administrative framework in the following four key areas: a) Preventing Disputes; b) Availability and Access to MAP; c) Resolution of MAP cases; and d) Implementations of MAP Agreements. The recommendations made are a minimum standard, meaning that every country involved in the Project must comply with it and is subject to a peer review process, evaluating each other’s implementation.
The results of Brazil’s peer review in each of the four key areas are the following:
a) Preventing disputes– As of November 2019, 33 of Brazil’s 35 tax treaties contained a provision requiring the competent authority of their jurisdiction to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of their tax treaties. For those treaties that do not contain such provision, Brazil reported that it has contacted the two relevant treaty partners, and will update them via bilateral negotiations.
b) Availability and access to MAP – This key area recommends that tax treaties should contain a provision allowing the taxpayer to request MAP assistance whenever the actions of one or both of the Contracting Parties do not act in accordance with the provisions of the tax treaty, including transfer pricing cases, application of anti-abuse provisions and audit settlements. The provision should also allow the taxpayer to present its request within a period of no less than three years from the first notification of such action, and each jurisdiction should act appropriately to make MAP guidance available and easily accessible. Although Brazil reported that it has made MAP guidance available and that it will give access to MAP in the specific scenarios in question, the country also committed to include the equivalent Article on its tax treaties, since 27 of its 35 treaties do not have it.
c) Resolution of MAP cases – Brazil has reported that all of its treaties contain the recommended provision, which requires each party’s competent authority to resolve justified objections by mutual agreement. This area also requires that every jurisdiction should seek to resolve its MAP cases within an average period of 24 months; Brazil reported that since 2015 it has improved the average time needed for resolution and that it is currently working on a draft of internal rules to keep improving the procedure.
d) Implementation of MAP agreements – Brazil reported that it has a specific team to deal with MAP cases, committing to implement every future agreement on a timely basis. None of the peers that provided inputs reported problems regarding the implementation of MAP Agreements.
Considering that Action 14 is a minimum standard, complying with all of its recommendations is essential for Brazil’s accession to the OECD. Therefore, despite all of the improvements already implemented, Brazil reported that it will strive to update all of its tax treaties with the necessary provisions.
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