The general authority of Zakat and Tax (GAZT) in the Kingdom of Saudi Arabia (KSA) issued guidance on the Mutual Agreement Procedure (MAP). The map article of the Indian Income Tax Convention is based on Article 25 of the OECD Model Tax Convention. An application for a POPs may be made by a taxpayer if it takes into account the actions of the tax authorities of one or both contractors or results in a tax that does not comply with the applicable tax treaty. This procedure allows the competent authorities of the contracting states to settle disputes or difficulties in interpreting or applying tax treaties on a consensual basis. The guidelines state that the resulting interest and penalties must be managed in accordance with India`s national tax law. As a result, Indian CAs do not have a mandate to address these follow-up issues and negotiate disputes arising from these issues. While the amount of interest and penalties related to the quantum of income must vary in the same proportion as the change in the number of revenues resulting from a resolution of POPs, some fixed penalties (which are not related to quantum income) would not be affected by the dissolution under map. In order to avoid unintended severity for taxpayers during the period of suspension of the application of POPs and for effective management of revenue collection, India has signed a Memorandum of Understanding with some countries on the suspension of tax collection. These include the United States, the United Kingdom, Denmark, Sweden and South Korea. In this regard, the guidelines specify that taxes that may be suspended are taxes that resulted from the litigation being debated in the POP context. With respect to POPs with other countries, Indian national law regulates procedures for suspending tax collection or suspending the application.
This is usually the partial or full payment of the tax debt, as issued by the Indian tax authorities. The MAP is a procedure by which the competent authorities consult and discuss international tax disputes, including transfer pricing disputes (PT), and avoid double taxation resulting from acts of one or two contracting states leading to taxation that does not comply with the applicable double taxation treaty (DTT). Please note that all KSA DTTs contain a MAP rule. The report, which included a peer review of India, concluded that India met half of the elements of the minimum of Action 14 as a whole. In addition, the report recommended improvements in some areas, including the requirement to publish comprehensive guidelines on the Indian-agreement procedure and information on India`s approach to key POP issues and the expectations of contracting parties. In this context, on 6 May 2020, the Central Council of Direct Taxes of India (CBDT) first issued a communication on the change in the REGULATION on POPs.2 On 7 August 2020, CBDT issued detailed guidelines (the guidelines) to provide important information on various aspects of the Indian map programme. In August 2020, the Central Direct Taxation Council (CBDT) issued guidelines for the Mutual Agreement Procedure (MAP), which contains four parts: the report contained OECD recommendations on key areas for improvement, in addition to the minimum action 14 requirements for an effective dispute resolution mechanism. The publication of comprehensive guidelines on POPs was one of the OECD`s recommendations as part of its peer review process.