In today’s global business environment, intra-group transactions, transfer pricing, and associated tax adjustments create potential risks of double taxation, disputes between jurisdictions, and lengthy litigation. Mutual Agreement Procedures (MAP) are a key international mechanism for resolving such tax disputes, particularly relevant when transfer pricing or profit allocation between related parties is involved.
In this publication, we analyze in detail what MAPs are, when and how they are activated, what they imply for transfer pricing, what their institutional framework is with the OECD, what the current challenges and trends are, and what companies can do to manage them effectively.
Legal and institutional framework
Mutual Agreement Procedures (MAPs) are based on double taxation treaties (DTTs), which are based on the OECD Model Tax Convention on Income and Capital. In particular, Article 25 of the Model allows the competent authorities of the contracting countries to consult with each other to resolve, in an amicable manner, cases where taxation does not comply with the provisions of the agreement.
In the area of transfer pricing, Article 9 of the Model-referring to Associated Enterprises-is directly related to MAPs, especially in its paragraph 2, which establishes the principle of correlative adjustment. This mechanism seeks to avoid economic double taxation that may arise when a tax administration increases the profits of an associated enterprise in its territory without the other jurisdiction reducing the profits of the counterparty by the same proportion.
Through the MAP, both competent authorities can coordinate and agree on a symmetrical adjustment, ensuring that the same income is not taxed twice in different countries.
Likewise, Action 14 of the OECD and G20 BEPS (Base Erosion and Profit Shifting) Project reinforces the effectiveness of these procedures, promoting their accessibility, transparency, and timely resolution. The aim is to ensure that taxpayers have access to an efficient mechanism for resolving international tax disputes and to strengthen legal certainty in cross-border transactions.
What is a MAP? Definition and scope
According to the Organization for Economic Cooperation and Development (OECD), a Mutual Agreement Procedure (MAP) is “a means by which the competent authorities of the contracting states consult with each other to resolve disputes concerning the application of double taxation agreements.” In practical terms, the MAP is an international tax dispute resolution mechanism designed to ensure that taxpayers are not taxed contrary to the provisions of a tax treaty.
This procedure can be initiated when a person or company considers that they have been, or could be, subject to undue or double taxation by two different jurisdictions.
There are two main forms of double taxation:
- Legal, when the same income is taxed twice on the same taxpayer in different countries.
- Economic, when two related entities are taxed on the same income within the multinational group.
In the area of transfer pricing, MAPs are particularly relevant. This occurs, for example, when a tax authority makes a primary adjustment (increasing the taxable income of a related company) and the administration of the other State does not make the corresponding adjustment or does not recognize that the transaction was carried out in accordance with the Arm’s Length Principle.
In such cases, the taxpayer may resort to the MAP to request that the competent authorities of both countries exchange information, assess the factual and legal situation, and reach a joint agreement that eliminates the resulting double taxation.
Furthermore, MAPs are not limited exclusively to transfer pricing issues. They may also cover disputes over tax residence, the attribution of profits to permanent establishments, or the interpretation of specific provisions of tax treaties.
In practice, MAPs are an instrument that strengthens international legal certainty, promotes administrative cooperation between countries, and fosters a more predictable environment for cross-border investment.
Stages of the MAP process
The development of a Mutual Agreement Procedure usually follows a set of clearly defined stages, which ensure transparency, due process, and consistency between the tax administrations involved.
1. Submissionof the request
The taxpayer initiates the procedure by submitting a formal request to the competent authority of their country of residence or nationality, in accordance with the established deadlines (usually within three years of the act that gave rise to the dispute).
The request must be duly supported by technical information, transfer pricing documentation, and arguments demonstrating that the taxation suffered contravenes the agreement.
2. Admissibility assessment
Once the request has been received, the competent authority reviews whether the case meets the formal and material requirements for admission. This initial assessment seeks to determine whether the dispute is covered by the treaty and whether the claim was filed within the time limit.
If the case is accepted, the intention to initiate consultations with the authority of the other contracting state is communicated.
3. Exchange of information and negotiation
In this phase, the competent authorities of both countries exchange relevant information and analyze the facts, the transfer pricing methods applied, and the legal grounds.
The goal is to reach a joint agreement on the tax treatment that eliminates double taxation. This process may involve bilateral meetings, the exchange of technical documents, and the application of the arm’s length principle in accordance with the OECD Guidelines.
4. Resolutionof the case
If the authorities reach an understanding, a mutual agreement is signed that sets out how the situation will be corrected-for example, through a correlative adjustment or the elimination of a double tax burden.
Such an agreement is binding on the tax administrations, but its acceptance by the taxpayer may be optional depending on the domestic legislation of each country.
5. Implementationof the agreement
Finally, the tax administrations of both States implement the necessary tax changes (adjustments to the tax base, tax credits, or refunds). Effective implementation ensures that double taxation is eliminated and the tax neutrality provided for in the treaty is restored.
Importance for transfer pricing
MAPs are a key tool for mitigating the risks inherent in transfer pricing because:
- They refer to the arm’s length principle: tax authorities compare the conditions of intra-group transactions with those that would occur between independent parties; MAPs offer a mechanism for resolving discrepancies between jurisdictions.
- They avoid double taxation: they allow for correlative adjustments when one administration increases a taxpayer’s taxable income due to a price adjustment and the other has not yet reflected that change.
- They promote tax certainty and business confidence, especially in complex global structures such as shared services, intra-group financing, or transactions involving intangibles.
- They improve coordination between international tax administrations, reducing the likelihood of profit splitting or fragmentation and protracted litigation.
Recent statistics and trends
According to OECD MAP statistics for 2024:
- The average resolution time for transfer pricing cases was 30.89 months, while for other cases it was 24.49 months.
- The stock of cases initiated after January 1, 2016, amounted to approximately 5,400, with 2,731 new cases in 2024, 2,385 resolved, and 5,747 in inventory at the end of the year.
- The average time to close a case in the bilateral phase of MAPs for transfer pricing in 2024 was 29.22 months, while the unilateral phase was 10.76 months.
- In the post-2016 inventory (cases initiated on January 1, 2016, or the year of accession to the Inclusive Framework), the breakdown by age shows that at the end of 2024:
- 58.3% of cases were less than 2 years old.
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- 24.8% were between 2 and 4 years old.
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- 10.6% were between 4 and 6 years old.
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- 6.3% were more than 6 years old.
- The report also notes that the number of jurisdictions that have not submitted statistics in 2024, despite being part of the Inclusive Framework, includes: Congo, Côte d’Ivoire, Kazakhstan, and Pakistan.
- The statistics show that MAPs continue to evolve, although there are challenges in terms of timelines and the quality of resolutions.
Challenges and best practices
Challenges
- Long resolution times, especially in complex transfer pricing or intangible asset cases.
- Variability between jurisdictions in technical capacity, resources, and negotiation practices.
- Need for greater regulatory predictability and procedural transparency.
Best practices
- Prepare the MAP request with robust documentation (functional analysis, comparability, financial impact).
- Maintain early communication with competent authorities.
- Evaluate the adoption of an APA (Advance Pricing Arrangement), either simultaneously or as a preventive alternative.
- Coordinate the multinational group’s defense strategy centrally to ensure global consistency.
Implications for multinationals and tax policies
For multinational companies, Mutual Agreement Procedures represent a key tool for international tax risk management. Proper understanding and use of these procedures mitigates the risk of double taxation, avoids penalties, and preserves legal certainty in cross-border transactions.
It is essential to incorporate MAPs into the global transfer pricing strategy, tax compliance, and internal audit policies. This is particularly relevant in sectors with a high volume of intra-group transactions or a presence in multiple jurisdictions.
In addition, practical knowledge of each country’s procedures, deadlines, and eligibility criteria can make the difference between an efficient resolution and a lengthy or unfavorable process. Companies that adequately document their transfer pricing policies and maintain proactive communication with the competent authorities tend to achieve more agile and consistent agreements.
From an international tax policy perspective, MAPs are an instrument of tax diplomacy that promotes cooperation between administrations and reinforces confidence in double taxation agreements.
By reducing conflicts and ensuring consistency in the application of international standards, these procedures encourage foreign direct investment and strengthen the integrity of the global tax system.
Conclusion
Mutual Agreement Procedures (MAPs) are an essential mechanism in transfer pricing management and international dispute resolution. While recent advances show improvements in effectiveness and coverage, challenges remain in terms of resolution times, jurisdictional coordination, and technical complexity.
Companies operating globally must have specialized advice, detailed documentation, and a proactive strategy to use MAPs effectively. Understanding and correctly applying MAPs not only mitigates tax risks but also strengthens the strategic position of companies in an increasingly demanding global tax environment.
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