The Revenue Administration has published an updated guide on the Mutual Agreement Procedure (MAP) application found in Double Taxation Treaties (DTTs). The revised guide, as an update on the issue in October 2019, was released on December 4, 2024, and applies to MAP requests filed on or after January 1, 2022.
As is widely known, the MAP application is typically provided for in Article 25 of many Double Taxation Treaties. It enables taxpayers to bring issues of double taxation—without necessarily resorting to domestic remedies—before the Competent Authorities (CAs) of the contracting states in which they reside or hold citizenship, or before the competent authority of another correspondent state. Essentially, it serves as a dispute resolution mechanism for international tax matters.
All of the Double Taxation Treaties to which Türkiye is a party contain MAP provisions. To further enhance the effectiveness of MAP in, the “Mutual Agreement Procedure” has also been codified in the fourth section of the Turkish Tax Procedural Law (Law No. 213). While the headings in the 2019 Guide remain largely in place, this new version offers more clarity where necessary, updates on the administrative issues to account for post-COVID-19 business practices, and reorganizes or expands certain headings. Efforts were also made to streamline and simplify the content.
Key Topics Addressed in the New Guide and Differences from the 2019 Guide:
1. Issues Subject to Interpretation or Application of DTTs MAPs are applied for resolving any double taxation of the taxpayer’s income (i.e. tax base). It is stipulated that the MAP process can be initiated for the following cases:
- For resolving issues arising from the interpretation or application of the DTT.
- For clarifying any term in the DTT that has not been clearly defined or fully understood.
2. Types of Meetings
3. Filing MAP Applications in Türkiye MAP applications in Türkiye should be submitted to the following address: ‘‘Gelir İdaresi Başkanlığı Avrupa Birliği ve Dış İlişkiler Daire Başkanlığı Çifte Vergilendirmeyi Önleme Anlaşmaları Müdürlüğü Devlet Mahallesi Merasim Caddesi No:9/1 06450 Çankaya/ANKARA’’ The guide notes that negotiations in MAP proceedings may be conducted in writing or verbally. This new version specifically adds references to face-to-face and online meetings.
4. Examples of Situations in Which Taxpayers Claim Taxation Contrary to DTTs Under the relevant article on MAP, taxpayers may contend that they have been taxed inconsistently with the DTT provisions in various scenarios, including (but not limited to) the following:
- Determining the profit attributable to a permanent establishment (PE) under the “Business Profits” article of the DTT.
- Resolving issues about whether an individual or entity is considered a resident of a particular contracting state.
- Determining whether a PE arises under the “Permanent Establishment” article of the DTT in the other contracting state.
- Addressing transfer pricing issues arising in transactions between associated enterprises under the “Associated Enterprises” article of the DTT.
- Addressing matters related to “Interest,” “Dividends,” and “Royalties” under the DTT, such as withholding taxes in the source state (where income is obtained) and any additional taxes imposed due to special relationships between payers and beneficiaries.
- Determining whether income from services rendered in the other contracting state should be treated as “Employment Income” under the relevant DTT article.
- Cases where the taxpayer has been denied DTT benefits under the “Entitlement to Benefits” article of the DTT
5. Applying for a Portion of a Tax Adjustment
The guide specifies that if the tax or tax base can be segmented, taxpayers may file a MAP request only for the portion that falls under the DTT’s scope.
6. Multiple DTTs and Multiple Tax Periods
The new guide clarifies that taxpayers may file a single MAP request for interconnected tax issues involving more than one DTT (which means more than one corresponding state) — and that a single MAP request may also suffice for multiple tax years.
7. Information and Documents Required for MAP Requests
The required documentation remains consistent with the 2019 guide. However, additional details are provided on information needed for transfer pricing cases.
8. Does Submitting a MAP Request Prevent ‘‘Local’’ Legal Action or Settlement?
Two new questions have been included:
- “Does a MAP request prevent initiating local legal proceedings?”
- “Does a MAP request prevent a local settlement application?”
9. Advance Pricing Arrangements (APAs) No changes have been made under the section on APAs.
10. OECD Website and the BEPS Action 14 Report Readers are directed to the OECD website for Türkiye’s MAP procedures country page, as well as the “Action 14 Report” (Making Dispute Resolution Mechanisms More Effective) under the Base Erosion and Profit Shifting (BEPS) initiative. This report requires countries to commit to a minimum standard for resolving disputes under DTTs promptly, effectively, and efficiently.
The BEPS Action 14 Minimum Standard comprises 21 elements and 12 best practices that evaluate a jurisdiction’s legal and administrative frameworks in this area. With the adoption of this standard, members of the BEPS Inclusive Framework have agreed to: ● Undergo a peer review process to assess the standards’ implementation. ● Report MAP statistics using a newly developed MAP Statistics Reporting Framework.
Türkiye’s Experience and Application of MAP
The Revenue Administration aims to expand and refine its expertise and practice in this area. Although Türkiye is party to a large number of DTTs, practical experience regarding MAP—and, in general, the interpretation or application of DTTs that requires consensus with another jurisdiction—remains limited. Türkiye’s primary experience involves issuing certificates of residence and completing the requisite forms. So far, mutual agreements have been reached with Austria, Azerbaijan, Greece, Saudi Arabia, Germany, and Switzerland. One practical obstacle is that, unlike certain European Union member states, Türkiye is not party to any Arbitration Convention that would allow a contracting state to resolve a particular tax dispute via arbitration. Consequently, if a MAP request involving Türkiye is not resolved within three years of negotiations, the absence of an Arbitration Agreement can cause the matter to remain unresolved. Where MAP requests are concerned, the time needed to resolve disputes varies according to the complexity of each case. However, the Revenue Administration aims to keep this duration below two years wherever possible. Conclusion MAP is a powerful international mechanism for preventing tax disputes and double taxation—especially for cases that cannot be resolved through domestic channels. While it has not been used extensively in Türkiye, the newly published guide represents a significant development. We encourage all taxpayers to remain aware of these developments and utilize MAP where appropriate.
References:
Turkish MAP Guide Link as follows:
https://www.gib.gov.tr/sites/default/files/fileadmin/CifteVergilendirme/KAU_Kilavuzu2024.pdf
Turkish MAP Guide Link (In English) as follows:
https://www.gib.gov.tr/sites/default/files/fileadmin/CifteVergilendirme/MAP_Guidelines2024.pdf
Dispute Resolution Profile of Türkiye:
OECD Report on Action 14: