Mutual Agreement Procedure Proceedings

Competent authority (institution) – State Tax Inspectorate of the Ministry of Finance of the Republic of Lithuania. The Standing Working Group on the Treatment of Double Taxation Procedures for the Settlement of Disputes is responsible for dealing with all POPs cases. The interlocutor for issues relating to double taxation proceedings is Ms Vaide Riskute, Head of the Permanent Working Group on Double Taxation Settlement Procedures Contact details: Tel. +370 5 2687 847, e-mail: Vaide.Riskute@vmi.lt It should be mentioned that the potential of compulsory arbitration is rarely exploited by developing countries and that the BRICS are no exception in this case. They refused to commit, through the provisions of Part VI of the Multilateral Convention on the Implementation of Contractual Tax Measures to Prevent Profit Reduction and Profit Shifting (MLI), which allow countries to introduce binding arbitration in their double taxation treaties, in accordance with the special procedures. In addition, mandatory conciliation is not among the elements of the mandatory minimum standard adopted as part of the global anti-BEPS campaign process. Given the cautious positions of the dominant number of modern States with regard to compulsory arbitration, it would appear that the scope of our research may be limited to POPs issues initiated by a person in the event of taxation that does not comply with the provisions of the Double Taxation Convention. `The taxable person shall not be a party to the proceedings and, subject to national law which provides otherwise, he shall have neither the right to have the file entered nor the right to be heard in the proceedings.` In other words, the convention between the competent authorities of the Contracting States in cases where taxes have been or are levied is not in conformity with the provisions of the double taxation convention concluded between those States (Lombardo, 2008). Its potential enables States Parties to enhance tax security, which is mentioned by G20 Heads of State and Government as one of the areas of their joint efforts to promote investment and trade in September 2016 (para. 19) (G20 Information Centre, 2016).

In particular, Article 19 of the MLI provides that a binding arbitration procedure must take place if the competent authorities are unable to reach agreement on the settlement of a case within two years of the commencement of a case. This is an important restriction in POPs cases in the past, as competent authorities were only required to try to resolve cases and disputes could not be resolved indefinitely. Article 19 ensures that disputes related to the contract will be settled within a set period of time, making it a more attractive option for taxpayers. In addition, articles 20 to 25 set out the manner in which arbitration proceedings are to be conducted in practice. In the past, it was often practical restrictions or a lack of consensus on how to proceed that blocked the solution. Some may argue that the advantage of an arbitration procedure lies in the fact that the existence of this mechanism provides an incentive for Member States to settle disputes before the expiry of the two-year period, which would be a success rather than a failure of the convention. However, the statistics also show that 202 cases had exceeded the two-year period, although it had been cancelled with the agreement of the taxable person. This indicates that taxable persons do not always consider the arbitration procedure available to them under the Convention as a desirable means of settling double taxation.

The first two paragraphs set out the obligation for the competent authorities to cooperate in order to resolve by mutual agreement the situation of taxable persons when they are subject to taxation which does not comply with the provisions of the Double Taxation Convention. . . .