Explain the concept of the Mutual Agreement Procedure (MAP) as provided under international tax treaties. What differentiates the OECD Model…

(A) Where in a situation a tax payer may believe that the treatment accorded by either or both Contracting States is not in accordance with the provisions of the tax treaty. In such a case, there is a need for dispute resolution which is addressed by the article named Mutual Agreement Procedure (MAP). This Article requires competent authorities of both countries to endeavor to resolve the conflict by engaging in bilateral negotiations. The Mutual Agreement Procedures (MAP) provides for dispute resolution through bilateral negotiations between competent authorities of both the contracting states. Key differences between the OECD Model Convention (Article 25) and UN Model Convention (Article 25B - Alternative B) are as follows: Article 25B(5) of the UN Model provides that an arbitration may be initiated if the competent authorities are unable to reach an agreement on a case within three years from the presentation of that case. However, Article 25(5) of the OECD Model provides a time limit of two years from the date when all the information required by the competent authorities in order to address the case need to be provided to both competent authorities.Article 25B(5) of the UN Model provides that arbitration must be requested by the competent authority of one of the Contracting States. Once such a request is made, the taxpayer will be notified. However, as per Article 25(5) of the OECD Model, arbitration must be requested in writing by the person who initiated the case.Article 25B(5) of the UN Model allows the competent authorities to depart from the arbitration decision if they agree to do so within six months after the decision has been communicated to them.