Background
On December 28, 2007, the Convention Between the United States and the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income (the 2006 Treaty) and the Protocol amending the 2006 Treaty (Protocol) entered into force. The 2006 Treaty modified certain provisions of the prior income tax treaty between the United States and Belgium. Among other things, the 2006 Treaty revises Article 24 (Mutual Agreement Procedure) of the prior treaty to provide for mandatory arbitration of certain cases in the mutual agreement procedure (MAP). The competent authorities of the United States and Belgium are jointly developing procedures for implementing the arbitration process. Information regarding the relevant procedures will be incorporated into a mutual agreement at a future date. This Announcement provides interim guidance concerning the “commencement date” for MAP cases for purposes of the arbitration process until a formal mutual agreement is published.
Commencement date
Paragraph 8(c) of Article 24 of the 2006 Treaty provides that arbitration proceedings generally shall begin two years after the commencement date of a MAP case. Under paragraph 7(a) of Article 28 of the 2006 Treaty, the commencement date for a MAP case that was already under consideration by the competent authorities as of December 28, 2007, shall be December 28, 2007.
For requests for competent authority assistance received on or after December 28, 2007, new paragraph 8(b) of Article 24 of the 2006 Treaty provides that the commencement date of such a MAP case is the earliest date on which the information necessary to undertake substantive consideration for a mutual agreement has been received by both competent authorities. For purposes of a competent authority request in the United States, the information necessary to undertake substantive consideration for a mutual agreement is the information required to be submitted to the U.S. competent authority under Revenue Procedure 2006-54, Section 4.05 (or any applicable successor provisions). For purposes of a competent authority request in Belgium, the information necessary to undertake substantive consideration for a mutual agreement is any information that would be required under instructions or commentaries published by the Federal Public Service Finance. See paragraph 6(p) of the Protocol.
The competent authorities of the United States and Belgium agree that, within 45 days after receipt of a request for competent authority assistance, each competent authority shall determine whether the taxpayer’s request provides information necessary to undertake substantive consideration. The agreement will also provide that, if the necessary information has been provided, then the relevant competent authority will advise the taxpayer and the other competent authority that the information submitted with the taxpayer’s request is sufficient to undertake substantive consideration of the request.
If the necessary information is not provided, the relevant competent authority will inform the taxpayer and other competent authority of what additional information is needed. After the relevant competent authority has determined that it has the necessary information it will inform the taxpayer and the other competent authority of its determination.
The agreement will also provide that the competent authorities shall inform taxpayers in writing of the commencement date consistent with new paragraph 6(p) of the Protocol.
A case initially submitted to the competent authorities as a request for an Advance Pricing Agreement (APA) is eligible for arbitration, but only to the extent tax returns have been filed with respect to all taxable years at issue. For purposes of establishing a commencement date for cases initially submitted as a request for an APA, paragraph 6(p) of the Protocol provides that the information necessary to undertake substantive consideration for a mutual agreement in the United States is the information required to be submitted to the Internal Revenue Service under Revenue Procedure 2006-9, section 4 (or any applicable successor provisions). In Belgium, the information is that which would be required under instructions or commentaries published by the Federal Public Service Finance. The competent authorities agree that they will modify this rule pursuant to paragraph 6(q) of the Protocol to take into account the procedures related to processing APA requests. Such agreement will indicate that the commencement date for cases initially submitted as a request for an APA shall be the earlier of i) the date on which the competent authorities have exchanged position papers setting forth their initial negotiating positions, or ii) two years from the earliest date on which the information necessary to undertake substantive consideration for a mutual agreement has been received by both competent authorities. However, the arbitration proceedings will in no event commence before one year after the submission of the tax return for the later of the corresponding tax years covered by the APA request (including any amendments) has elapsed. The competent authorities shall inform the taxpayers in writing of the commencement date.
References/Related Topics
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