Saudi Arabia’s General Authority of Zakat and Tax (GAZT) published, on 9 June, new guidance on making requests under the mutual agreement procedure (MAP) in tax treaties. As a member of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS), the issuance of the MAP guidance is in line with the Saudi Arabia’s commitment to meet the minimum standard under BEPS Action 14.
The guidelines aim to set out the process through which taxpayers can resolve tax treaty disputes by way of requesting assistance from the competent authority in Saudi Arabia. They cover a number of topics and steps concerning the MAP process, including an overview of the MAP, conditions for requesting a MAP, how to request a MAP, timeframes for resolving a MAP case and the MAP stages.
The introduction of MAP in Saudi Arabia will provide taxpayers with increased certainty towards resolving cross-border double taxation, typically arising from transfer pricing adjustments, and resolving treaty-related tax disputes.
According to the guidelines, MAP provides a bilateral mechanism that ensures that the GAZT can engage with the competent authority of another contracting state to negotiate and resolve the request of the taxpayer covered by a double tax treaty.
Where the actions of Saudi Arabia and/or another contracting state result or will result in taxation not in accordance with the provisions of a double tax treaty, a MAP can be requested by a taxpayer for GAZT to assist with resolving these issues.
Competent authorities may also attempt to relieve double taxation in cases not covered by the tax treaty through unilateral action by trying to resolve the case by mutual agreement with the contracting state’s competent authority.
With the introduction of the Saudi Arabia transfer pricing rules in February 2019 and Saudi Arabia’s significant network of tax treaties, publication of the MAP guidance will be welcomed by many taxpayers with sizable operations in Saudi Arabia. It will provide greater certainty on how the GAZT can support taxpayers faced with double taxation and tax treaty interpretation and implementation issues.