Introduction to the Law of Double Taxation Conventions

S. 15314 Mutual agreement procedure

14.1 Mutual agreement procedures

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DTCs also contain rules dealing with the legal protection of the taxpayer. In DTC law, the competent authorities in the two contracting states are responsible for the application of the DTC rules. In practice, it is possible for the authorities of the two contracting states to come up with different conclusions. Even if in both states the assessments are appealed, it is possible that the different interpretations of the same rule will remain since the courts of appeal of the two contracting states can also interpret situations differently. There is a lack of a superior authority.

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The rules of the mutual agreement procedure try to cure this deficiency. Art. 25 OECD Model contains the mutual agreement procedure. It can be initiated by any resident person who considers that the actions of one or both of the contracting states result or will result for him/her in taxation not in accordance with the provisions of the DTC. The condition is therefore not double taxation but rather taxation not in line with the DTC. Often, mutual agreement procedures are initiated on the basis of economic double taxation (Art. 9 OECD Model).

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