What is the Mutual Agreement Procedure and who can make a request for the commencement of the Mutual Agreement Procedure in Turkey?
All of the double taxation agreements Turkey has concluded, contain provisions related to the Mutual Agreement Procedure. MAP is generally stipulated under Article 25 of the agreements. Texts of the agreements concluded by Turkey which are still in force and the information about these agreements are available on our website: www.gib.gov.tr
Despite comprehensive and carefully designed provisions of the Double Taxation Agreements, erroneous procedures and misinterpretations may sometimes occur in the course of the application of such provisions by related tax authorities of the Contracting States. It could also be seen that sometimes the provisions of the Double Taxation Agreements are not taken into consideration at all.
A common way for taxpayers who face such undesired circumstances and cannot solve their problems with the related tax authority is to have recourse to national remedies such as litigation and reconciliation procedures. The “Mutual Agreement Procedure” in the Double Taxation Agreements offers to taxpayers a way of solution to present their case either to the competent authority of the Contracting State of which they are residents or as the case may be, to the competent authority of the Contracting State of which they are citizens, irrespective of the national remedies provided by the domestic laws of those States. In this sense, the aim of this guideline is to inform taxpayers on the “Mutual Agreement Procedure” Article included in all Double Taxation Agreements as well as on the application of this Article.
The Mutual Agreement Procedure Article included in a Double Taxation Agreement explains the steps to be followed by the residents of one of the Contracting States when they consider that the actions taken by one or both of the Contracting States in respect of them are not or will not likely be in accordance with the provisions of the agreement.
Taxpayers facing such a situation have the right to present their cases;
- to the competent authorities of the Contracting State of which they are residents, irrespective of the remedies provided by the domestic law of the Contracting States,
- to the competent authorities of the State of which they are citizens if they are subject to an unfavorable taxation in the other State due to their nationalities compared to the citizens of that other State.
The taxpayers, who consider that they have been subject to taxation in the other Contracting State not in accordance with the Double Taxation Agreement notifies the competent authorities of the State of which they are residents of their situation in a certain period of time. This period is regulated under the Double Taxation Agreements and varies as to the Agreements. The table illustrating these periods is available on the web site of the Revenue Administration.
Under the same Mutual Agreement Procedure Article, competent authorities of the Contracting States may try to resolve the problems arising from the interpretation or application of an Agreement with the use of the Mutual Agreement Procedure.
Accordingly, competent authorities of the Contracting States may commence a Mutual Agreement Procedure process for an incomplete or an ambiguous definition in a Double Taxation Agreement.
Additionally, the Mutual Agreement Procedure Article also states that competent authorities may consult to each other in situations where double taxation arises for transactions not covered by the Double Taxation Agreement.
According to this Article, competent authorities are not obliged to communicate through diplomatic channels in order to reach a mutual agreement; but they prefer to communicate directly with each other.
If the competent authority of the State receiving the taxpayer’s demand on the basis that he is subject to taxation not in accordance with the provisions of the agreement, cannot resolve this problem on their own, the case may be presented to the competent authority of the other Contracting State and, depending on the situation, written or oral discussions may be held to reach a mutual agreement.
Who can make a request for the commencement of the Mutual Agreement Procedure?
A taxpayer may request the commencement of a Mutual Agreement Procedure process if he is a resident of one of the Contracting States. However, persons whose cases fall under the scope of paragraph 1 of the Article titled “Non-discrimination” of a Double Taxation Agreement, namely citizens who have been subject to a discriminative treatment because of their nationalities, may also ask for the commencement of a Mutual Agreement Procedure process.
Source: GİB – Revenue Administration / Link: https://www.gib.gov.tr/sites/default/files/fileadmin/CifteVergilendirme/MAP_Guidelines2019.pdf
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