Frequently Asked Questions (FAQs) on Mutual Agreement Procedures (MAP)

Frequently Asked Questions (FAQs) on Mutual Agreement Procedures (MAP)

The MAP article in tax treaties allows designated representatives (the “competent authorities” (CAs)) from the governments of the contracting states to interact, with the intent to resolve international tax disputes. These disputes include cases involving double taxation as well as inconsistencies in the interpretation or application of a treaty.

The IRB has issued the MAP Guidelines to provide guidance on obtaining assistance from the Malaysian CA by persons that fall within the scope of an effective tax treaty that Malaysia has with its treaty partners. The latest MAP Guidelines are dated 19 December 2017.

Following the above, the IRB has recently issued an FAQs document on the MAP. Some of the salient points are outlined below.

• The time limit for an MAP request depends on the period specified in the tax treaty. Alternatively, if the period is not specified in the treaty, the time limit is within three years from the first notification of action.

The FAQs provide two examples to demonstrate the calculation of the three-year period, as replicated below.

Example 1:

A notice of additional assessment for the year of assessment (YA) 2018 was issued on 1 January 2020 as a result of an audit. That notice is considered as “the first notification”. Hence, the taxpayer has until 31 December 2022 to submit the MAP request.

Example 2:

Same information as Example 1, but the amended Notice of Assessment (partial tax reduction) was issued on 1 January 2021 based on acceptable new documentation submitted by the taxpayer. In this scenario, the taxpayer still has until 31 December 2022 to submit the MAP request because the “first notification” is the notice dated 1 January 2020.

• The MAP request must indicate at least one Article from the relevant tax treaty.
• The taxpayer must demonstrate that the element of double taxation is probable and not just a possibility.
• Examples of MAP issues include:
  • Allocation and attribution cases (transfer pricing)
  • Residency status
  • Withholding tax
  • Royalties (including the reclassification of business transactions as royalty according to domestic provisions)
• The taxpayer must clearly indicate the amount of double taxation disputed in the MAP request. The amount should be supported by relevant documents and computations. The FAQs provide an example to demonstrate this.
• If a taxpayer withdraws an MAP request before obtaining the MAP outcome, the case will be considered closed. In addition, the taxpayer will not be able to submit another MAP on the same issue for the same YA.

The FAQs are available at the following link: FAQs on MAP