Possibility of multilateral mutual agreement procedures
The situation may arise where the transaction to which the mutual agreement procedure relates does not only affect two states, but rather there are more states involved.In such cases, the most appropriate way to resolve double taxation could be through a multilateral agreement, whether by negotiating a single agreement between all competent authorities concerned or by negotiating separate, but consistent, bilateral agreements.
This could be the case when it is necessary to determine the appropriate distribution of profits between two permanent establishments, located in different states, of an entity resident in a third state.In such a case, multilateral negotiation would be possible if the three states had signed an enforced Tax Treaty with a mutual agreement procedure provision equivalent to that established in Article 25 of the OECD Model Tax Convention on Income and on Capital.
Another example could be the situation in which a German company acquires goods from a Japanese associated company, to, in turn, sell them to, among others, another associated Spanish company in charge of the distribution in the Spanish local market. In that case, if it is foreseen that the Spanish and German competent authorities by their own cannot solve the case because the Japanese company has significantly influenced in obtaining a result against the arm’s length principal, a multilateral mutual agreement procedure can be requestedHere, once again, negotiation on the basis of the Tax Treaty would be possible if all of the states had signed among them an enforced Tax Treaty with a mutual agreement procedure provision equivalent to that established in Article 25 of the OECD Model Tax Convention on Income and on Capital.
Also within the scope of the European Arbitration Convention, multilateral friendly settlement procedures may arise in the case of an "EU triangular case". For the purposes of the European Union Convention, an "EU triangular case" means a case where two competent authorities in the EU are unable to decide because an associated undertaking established in one or more other Member States has had a significant influence in bringing about an outcome contrary to the arm's length principle.In such cases, as the soon as the competent authorities decide that they are dealing with a triangular case, they will, without delay, invite the other competent authorities concerned to join the procedure.In such cases, the competent authorities concerned may take one of the following approaches:
multilateral approach, permitting the immediate participation of all competent authorities involved; or
bilateral approach, between the two competent authorities identified initially, which will invite the other competent authority or authorities to take part as observers; or
bilateral approach, opting for initiating more than one parallel bilateral procedure, inviting the other competent authority or authorities to take part as observers in the respective mutual agreement procedures initiated.
The taxpayer must, as soon as possible, inform the tax authority or authorities concerned that another party or other parties, in another Member State or other Member States, may be involved in the matter.