Under Mutual Agreement Procedure

Within the EU, the EU Arbitration Convention entered into force on 1 January 1995 as an instrument that promised the elimination of double taxation between Member States. It is important that it provides for a mandatory and binding arbitration mechanism to eliminate double taxation by referring to the opinion of an independent advisory body if the competent authorities do not reach an agreement after two years. This went beyond the bilateral treaties that entered into force at the time, which simply required the competent authorities to make their “best efforts” to eliminate double taxation. Article 25 defines three different areas in which mutual agreement procedures are generally applied. In practice, relatively few cases have been the subject of arbitration proceedings. figures published in July 2019 by the EU Joint Transfer Pricing Forum, with counterparty statistics pending under the arbitration agreement at the end of 2018 showing that there were 932 live cases in Member States; However, only two live cases were arbitrated. There are clear and often long deadlines within which the MAGP can be requested. In particular, the second sentence of Article 16(1) of the MLI provides that the POP case must be brought within a specified period, that is to say, less than three years from the first declaration of the tax action, and not in accordance with the provisions of a classified tax convention. This means that taxable persons cannot submit their case within three years of the first notification of the appeal leading to taxation, in accordance with the provisions of the covered tax treaty. The first communication is generally considered to be the definitive taxation at the end of a tax application or similar. In order to avoid double taxation resulting from possible actions of the tax administrator of another State in the context of the future audited transaction, it is advisable to request, through the request, the approximation of the pricing principles of controlled future transactions and the conclusion of the agreement with the competent authority of another foreign State.

in accordance with the provisions of the tax convention applicable between the Republic of Lithuania and another State for the avoidance of double taxation of income and capital. When the request is submitted, the mutual agreement procedure may be initiated in accordance with the procedure laid down in the acts. The mutual agreement procedure (MAGP) remains the most widely used and effective means of eliminating double taxation. . . .

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