Earlier the month of June 2019, the Maltese Commissioner for Revenue issued guidance under the provisions of article 96(2) of the Income Tax Act, Chapter 123 of the Laws of Malta (the ‘ITA’) on the use of Mutual Agreement Procedure (‘MAP’).
A MAP is a procedure which allows the Malta Competent Authority or designated representatives of such Competent Authority to interact with their counterparts in Contracting States/Parties with the intent to resolve international tax disputes. MAP is possible for bilateral and multilateral disputes and may deal with requests for the multi-year resolution of recurring issues.
In the case of Malta, a MAP is possible under the provisions of a MAP article in-a Double Taxation Agreement; the Convention of 23 July 1990 on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (90/463/EEC) – the EU Arbitration Convention. The Malta Competent Authority acknowledges that a Convention permits a MAP for resolving difficulties arising from the interpretation or application of that Convention in the broadest sense of the term including: (a) cases where there is a bona fide foreign-initiated self-adjustment; and (b) cases where there is an audit settlement between another tax authority and a taxpayer.
The taxpayer must first raise the issue formally (by requesting assistance in writing) with the relevant Contracting State/Party according to that Convention. Upon receipt of a taxpayer’s MAP request, the Malta Competent Authority will determine whether the request is justified and whether it is possible to resolve the case without the involvement of the other Competent Authority. Before declining a MAP request the Malta Competent Authority will consult with the other Competent Authority.