The Inland Revenue Department (IRD) has issued guidelines under the provisions of Article 96(2) of the Income Tax Act, on the Mutual Agreement Procedure (MAP). This procedure allows the Minister of Finance as the Malta Competent Authority, or any designated representatives, to interact with counterpart Competent Authorities in states that have contracted to a Convention, in order to resolve international tax disputes.

With respect to Malta, the possibility of a MAP is twofold i.e. under the following Conventions:

  • Any double taxation agreement
  • The EU Arbitration Convention

The MAP article within a Convention, together with the powers granted to the Malta Competent Authority, empowers the Authority to reach a resolution of MAP cases, with respect to difficulties arising from the application of that Convention. Access to MAP is provided with regard to a number of subjects, such as transfer pricing adjustments, attribution of profits to a permanent establishment, dual residence of individuals and persons other than individuals, and withholding tax levied beyond what is permitted by the applicable Convention, amongst others.

Any MAP issues must be raised formally by the taxpayer, through a request of assistance in writing, with the relevant contracting state according to that Convention. The Guidelines state that taxpayers are strongly encouraged to ensure that the person concerned in the other contracting state also contacts its Competent Authority. This request must be submitted within the period specified in the relevant Convention. To facilitate the expeditious resolution of a MAP case, the taxpayer is encouraged to submit all supporting material, promptly and simultaneously, to both Competent Authorities.

Certain considerations are to be taken into account by the Competent Authority regarding whether they are to accept a MAP request. If the request is denied, this decision may be appealed by the taxpayer. If accepted, the Competent Authority must communicate regularly with its counterpart (every 90 days), and must ensure that the matter is resolved in a timely manner (within 180 days of the acceptance of the MAP request). Once the matter is resolved, the Malta Competent Authority must communicate the terms of the resolution to the taxpayer imminently.

The Guidelines state that whilst the time taken to complete a MAP case may vary according to its complexity, the Malta Competent Authority will endeavour to conduct the MAP process as expeditiously as possible and to complete the case within 24 months from the date of acceptance of the taxpayer's MAP request.

A copy of the guidelines can be obtained by clicking here