Non-initiation of a mutual agreement procedure in the absence of a tax assessment, for example, on the basis of a simple self-assessment that 'gives rise' to double taxation.

The initiation of a mutual agreement procedure requires, among other things, that a person considers that the measures taken by one or both contracting states imply, or could imply, taxation that is not in accordance with the provisions of the agreements and conventions that provide for the elimination of the double taxation of income and, where applicable, capital.While a taxpayer may request the initiation of a mutual agreement procedure without waiting until required to pay, or notified of, taxation that is considered to be ‘not in accordance with the provisions of the agreements and conventions’, in order to initiate a mutual agreement procedure, the risk that such taxation is going to occur needs to be not just possible but probable.

To that end, such measures must have been taken by the tax authority.

It may be the case, for example, that it is the taxpayers themselves that decide to change the original valuation of its related party transactions.In this case, as there is only one market value, the taxpayer will have to change the valuation in both States and double taxation should not occur.

The mere submission of a self-assessment, complementary to another self-assessment previously submitted for the same period, modifying the valuation of the transactions with related persons or entities, will not provide any entitlement to the mutual agreement procedure.In such cases, the related persons or entities, resident in the other state, must request the rectification of the tax returns submitted in that state.

A taxpayer may request the initiation of a mutual agreement procedure to resolve recurrent matters arising in the following years for those affected by a mutual agreement procedure that has already been requested when the necessary requirements for doing so are satisfied.

As mentioned above, a sine qua non for the initiation of a mutual agreement procedure is that the taxpayer considers that a measure taken by the tax authority of one or both contracting states implies, or could imply, taxation that is not in accordance with the provisions of the agreements and conventions that provide for the elimination of the double taxation of income and, where applicable, capital.

Consequently, access to the mutual agreement procedure will not be granted for the multi-annual resolution of recurrent matters similar to those resolved in a mutual agreement procedure and which affect years following that procedure, except, where applicable and provided that the other requirements for the initiation of the procedure are satisfied, where either of the states has taken measures that imply, or could imply, taxation not in accordance with the provisions of the applicable Tax Agreement.