On 9 June 2020, the General Authority of Zakat and Tax (GAZT) of Saudi Arabia has published MAP Guidance (Request for Mutual Agreement Procedure –Taxpayer guidance). The purpose of this document is to set out the process through which taxpayers can request assistance from the Competent Authority in the Kingdom of Saudi Arabia (KSA) to resolve disputes arising from taxation not in accordance with the provisions of the relevant double taxation agreement. In KSA, the Ministry of Finance has delegated this task to the GAZT.

According to the provisions set forth by double tax treaties signed by KSA and relating to resolution of difficulties arising where the actions of one or both of the Contracting States result or will result, for the taxpayer, in taxation not in accordance with the provisions of the convention, GAZT will endeavor to resolve such cases by mutual agreement with the Competent Authority of the other Contracting State. In such a case, the taxpayer may request assistance from GAZT to resolve the issue.

Mutual Agreement Procedure (MAP)

MAP is designed to relieve double taxation, typically arising from transfer pricing cases; resolve treaty-related tax disputes, and issues in interpreting or applying a tax treaty. MAP provides a bilateral mechanism for GAZT to engage with the competent authority of another Contracting State. The taxpayer may request a MAP if he believes he is being taxed or will be taxed, not in accordance with a tax treaty. Once the taxpayer lodges his request, he does not take part in MAP negotiations. The competent authorities negotiate to resolve his request. They can also try to relieve double taxation in cases not covered by the tax treaty.

Conditions for requesting a MAP

The taxpayer may request a MAP when he considers the actions of one or both Contracting States results or will result, in taxation not in accordance with a tax treaty. The risk of such taxation must be probable (not merely possible). Further details have provided in Guidance.

Eligibility of MAP request

Any person resident in KSA, or in another as defined in the double tax treaty which applies to the case, and that considers that the actions of KSA and/or of the other Contracting State lead or may lead for him in taxation, not in accordance with the provisions of such double tax treaty, may irrespective of the remedies provided by KSA’s legislation or the domestic law of the other Contracting State, present his case to GAZT. In cases where an adjustment is made that affects associated enterprises resident in the different Contracting States, it is advisable that each of those enterprises submits a request for initiating a MAP to the competent authority of the State of which it is a resident.

Timeframes for resolving a MAP case

MAP cases should be resolved within 2 years, depending on the complexity of the taxpayer’s case. However, GAZT will try to resolve the taxpayer’s case as quickly as possible. In the meantime, GAZT will communicate with the taxpayer and with the other Contracting State on a timely basis and keep the taxpayer informed of the progress of his case.

MAP stages

Guidance has provided 2 stages of the MAP process and the possible outcomes of the Competent Authority mutual agreement. The first stage in the MAP process has three steps: The taxpayer submits his request to GAZT; GAZT considers whether his request is justified; If the request is justified, GAZT will determine if it can provide unilateral relief. Furthermore, in the Guidance gives details about ‘Competent authority mutual agreement, Confidentiality of MAP Cases, Penalties and interest (delay fine) under MAP, tax collection under MAP’

Further details are provided in the Guidance. Guidance has published in both Arabic and English. The taxpayer can get help through this Guidance to increase taxpayer confidence and certainty, and to resolve disputes arising from taxation not in accordance with the provisions of the relevant double taxation agreement.