By Alex Cooper
On February 7, 2018, the Norwegian Government published detailed taxpayer guidance on the mutual agreement procedure (MAP) framework set out in Norway’s tax treaties.
The guidance is general in nature, but on certain points it provides specific details relevant for cases related to pricing of intra-group transactions.
The guidance notes that MAP is available when the taxpayer considers that the actions in one or both of the treaty countries result, or will result, in taxation that is not in accordance with the tax treaty. It adds that MAP is not available when a taxpayer disagrees with the tax authorities’ application of domestic tax legislation.
According to the guidance, MAP is available in transfer pricing cases between associated enterprises regulated by a tax treaty provision corresponding to article 9 (1) of the OECD’s Model Tax Convention. The Norwegian competent authority will not refuse a case for MAP on the ground that the tax treaty does not contain a provision regarding corresponding adjustment, the guidance notes.
A MAP may be relevant for obtaining a clarification on issues including: tax residence under the treaty, existence of a permanent establishment (PE), allocation of profits to a PE, allocation of profits to associated enterprises, and the classification and taxation of profits and employment income.
An application for MAP must be submitted to the competent authority in the state where the taxpayer is resident. If the taxpayer is resident in both treaty countries according to domestic legislation, the application must be submitted to the country where the taxpayer considers himself to be resident as per the tax treaty.
The guidance notes the relevant information that a MAP application must contain, including with respect to MAP cases that relate to transfer pricing. It discusses the time limit for requesting a MAP and the taxpayer’s role in the MAP process.
Finally, the guidance notes that the MAP provision has been extended with regulations on arbitration in tax treaties with the Netherlands, Switzerland, and the UK. In these cases, the taxpayer can request for unresolved issues to be determined through arbitration if the competent authorities cannot agree before a specified time limit, the guidance notes.
The author is editorial assistant, TP News