MEMORANDUM
Italy Tax Alert: First Official Domestic Approach to the Mutual Agreement procedure
The increase of international trade and financial crisis is bringing a lot of pressure to Governments revenues.
Tax authorities are almost forced to collect as money as possible.
In this scenario, the Mutual Agreement Procedure (MAP) covered by article 25 of tax treaties, that follows the model proposed by Organization for Economic Cooperation and development or by U.S.A or by United Nation model, is a fundamental instrument for the taxpayer with international interests.
Under the meaning of art. 25 of OECD (and of art. 25 - alternative A and B - of UN Model Convention ) Mutual Agreement Procedure is an administrative procedure provided for in tax treaties for resolving difficulties arising out of their application, commonly used in cases of - juridical and economical - double taxation (mostly with regards to allocation of head office expenses, arm's length allocation of profits between associated enterprises, etc.).
The procedure may also be used to resolve problems relating to the interpretation or application of the treaty and provides the basis for informal communications between treaty countries.
Some countries have national regulations about MAP.
Italian Tax Administration recently issued the first document about it: on 5th June 2012[1], Italian Tax Revenues issued the first official regulation on the application of the MAP procedures in Italy, because of the notable increase of international tax disputes arising from cases of double taxations, especially in the field of transfer pricing.
Regulations (Circulari/Risoluzioni) issued by Italian Tax Authorities are not mandatory even for Italian Tax Officers; however it is for sure an example of good practice to take into consideration when Italy is part of the MAP.
The Italian tax approach follows the OECD trend, since it treads down the MEMAP best practice[2], and the information provided herein.
The document clarifies that:
MAP can be activated even if there is not a formal request of collection of taxes from administration;
if the Italian taxpayer reach an agreement with the Tax Authorities or a definitive Italian Tax Court judgment is issued the MAP will not affect anymore the Italian taxpayer in Italy;
there are domestic legal instruments to suspend the collection of taxes during the MAP;
in the case of activation of MAP with the "new" arbitration clause is not possible to sue Tax Administration to Italian Tax Courts.
However, the Italian regulation loses the opportunity to clarify important issues of the MAP, that are not analyzed and of course are part of the possible improvement of the MAP in itself.
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