The second stage peer review report on the implementation of the Action 14 minimum standard (making dispute resolution mechanisms more effective) by the United Arab Emirates (UAE) was published by the OECD’s Inclusive Framework on 13 September 2022.
The report notes that the UAE has a large tax treaty network consisting of more than 130 tax treaties and has a small inventory of mutual agreement procedure (MAP) cases, with a small number of new cases submitted each year. The first stage peer review report noted that the UAE met the majority of the elements of the Action 14 minimum standard. The government has been working to address the remaining issues, and the second stage peer review report concludes that the UAE has resolved most of the issues identified.
The report notes that all but one of the UAE’s tax treaties contain a provision relating to the MAP, and generally the MAP articles are in line with paragraphs 1 to 3 of Article 25 of the OECD Model Tax Convention.
The UAE’s treaty network is mainly in line with the requirements of the Action 14 minimum standard, but almost 15% of the treaties do not contain the equivalent of the second sentence of Article 25(1) of the OECD Model as the timeline to file a MAP request is shorter than the required three years from the first notification of the relevant action. Almost 12% of the treaties do not include a provision for mutual agreements to be implemented regardless of any time limits in domestic law; or the alternative provisions for Article 9(1) and Article 7(2) to set a time limit for transfer pricing adjustments. Also, almost 10% of the treaties do not contain a provision allowing the competent authorities to consult together to eliminate double taxation in cases not provided for in the treaty.
The UAE has signed and ratified the multilateral instrument (MLI) to implement treaty-based provisions arising from the OECD project on base erosion and profit shifting. The MLI can be used to update some of the treaties to bring them in line with the minimum standard. In the case of treaties that cannot be modified using the MLI, the UAE intends to update the treaties through bilateral negotiations. The report notes however that except for two treaties where bilateral negotiations are ongoing or completed, the UAE does not have a specific plan for negotiations on the other treaties and has not taken specific actions for the negotiations.
In the years from 2018 to 2020 the UAE completed MAP cases within an average time of 15.10 months, which is within the time period of 24 months required by the minimum standard. The report considers however that adequate resources need to be made available to allow the competent authority to identify and resolve MAP cases in a timely and efficient manner, and to cope with a possible future increase in MAP cases.
The report notes that the UAE provides access to the MAP in all eligible cases; and has clear and comprehensive guidance on the availability of the MAP and its practical application. The UAE has also put in place a documented bilateral consultation process for situations where the competent authority considers that the issue raised by taxpayers in a MAP request is not justified.
The report notes that the UAE’s competent authority operates fully independently from the audit function of the tax authorities and adopts a co-operative approach to resolving MAP cases in an effective and efficient manner. Appropriate performance indicators are used for the MAP function, although the MAP statistics were not submitted for the MAP Statistics Reporting Framework within the deadline for the relevant years.
The report confirms that the UAE meets the minimum standard in relation to the implementation of MAP agreements.