Contents

This section describes the tasks and functions carried out by the competent authority of the taxpayer’s state of residence when the taxpayer has submitted a request for MAP. See Article 25(2) of the OECD Model Tax Convention.

The section contains the following parts:

  • Approval of the taxpayer’s request;
  • Conclusion of the case without initiating MAP;
  • Initiation of MAP;
  • Deferred payment of tax and interest;
  • Contact and negotiations with the competent authority of the other state;
  • The taxpayer’s consent to the agreement;
  • Arbitration provision.

Approval of the taxpayer’s request

Upon receiving a request for MAP, the competent authority will determine whether the request meets the requirements for MAP. The competent authority will review, among other things, whether

  • the taxpayer is covered by a DTC;
  • the time limit set out in the relevant DTC has been observed;
  • the request appears to be justified.

Pending appeal or judicial review

Where an appeal or judicial review of the issue in dispute is pending, the competent authority may not for that reason refuse to approve the request and initiate the mutual agreement procedure. The competent authorities may postpone the case until a court decision has been made. See paragraph 42 of the commentary on Article 25 of the OECD Model Tax Convention.

Decision by a court or by an appeals body

It is assumed that the competent authority will only rarely conclude a MAP agreement which reaches a different conclusion than that of the Danish National Tax Tribunal. However, this may happen if it is justified by specific circumstances. The Danish tax authorities cannot deviate from a court decision.

The competent authority is obligated to initiate MAP negotiations with the competent authority of the other state, even if the courts have made their final decision on the case. See paragraph 35 of the commentary on Article 25 of the OECD Model Tax Convention.

Conclusion of the case without initiating a MAP

If the taxpayer’s objection concerns only the taxation in his or her state of residence, the competent authority may decide not to initiate the MAP process if it finds that the objection is justified.

The competent authority must accordingly as soon as possible arrange for an adjustment of the tax assessments concerned in accordance with the taxpayer’s claim. See paragraph 32 of the commentary on Article 25 of the OECD Model Tax Convention.

Extraordinary reopening under section 27(1) para (4) of the Danish Tax Administration Act

Without applying the mutual agreement procedure, the taxpayer may request the reopening of a tax assessment under to section 27(1) para (4) of the Danish Tax Administration Act (Skatteforvaltningsloven). This rule ensures that a taxpayer may have a tax adjustment after the ordinary time limit has passed if the request for an adjustment is a direct result of a decision made by a foreign tax authority that is of significance to the Danish taxation. A condition for the reopening is that the Danish Tax Agency has approved the foreign tax authority’s decision and that the request is made within a period of six months as stated in Section 27(2) of the Danish Tax Administration Act.
This provision might also apply where the Danish Tax Agency finds that a foreign tax authority has made a decision resulting in double non-taxation. In that case, the Danish Tax Agency can make an assessment after the expiration of the ordinary time limit , provided that the taxation is in accordance with Danish tax law.

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Initiation of MAP

If the competent authority finds that the taxpayer’s request fully or partially concerns taxation in the other state, it must initiate MAP negotiations with the competent authority of the other state. See paragraph 33 of the commentary on Article 25 of the OECD Model Tax Convention.

Exchange of information

Article 26 of the OECD Model Tax Convention governs the exchange of information between the competent authorities. The taxpayer is seen as a party to the case for the purposes of the Danish Tax Administration Act’s rules concerning access to documents.

Deferred payment of tax and interest

The OECD Model Tax Convention does not comment on deferral of payment of tax and interest.
In accordance with section 51 of the Danish Tax Administration Act (Skatteforvaltningsloven), the taxpayer may request a deferral of the payment of tax and interest where the request concerns an objection to the payment of Danish taxes. The Danish Tax Agency regards the request for deferral as a request to reopen the tax assessment and the deferral can be granted once the Danish Tax Agency has approved the request for MAP.

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Negotiations with the competent authority of the other state

Where the competent authority of in one of the contracting states has accepted the taxpayer’s request for MAP, the competent authority in question contacts the competent authority of the other state to find a solution to the taxpayer’s case.

Normally, the discussions will begin with a written statement of the resident state’s competent authority’s view of the case, a position paper, after which the competent authority of the other state will express its view of the case. In some cases, the competent authorities will meet and negotiate to reach an agreement.

The competent authorities may communicate with each other directly without going through diplomatic channels. See Article 25(4) of the OECD Model Tax Convention.

The competent authorities are obligated to negotiate with each other and to use their best endeavours to reach an agreement, but they are not obligated to reach a result, which eliminates the double taxation. See paragraph 37 of the commentary on Article 25 of the OECD Model Tax Convention. In practice, the competent authorities usually reach an agreement, which all parties to the case can accept.

The taxpayer’s consent to the agreement

If the competent authorities reach an agreement on a solution to the case, they will exchange signed copies of the agreement. The taxpayer is made aware of the agreement and confirms in writing that he consents to the agreement. At the same time, the taxpayer declares that he waives the right to seek other means of appeal or to take legal action regarding the same issue and income year. See paragraph 45 of the commentary on Article 25 of the OECD Model Tax Convention.

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If the taxpayer does not consent to the agreement, the agreement becomes void. The taxpayer may then only invoke domestic rules - limited by the applicable time limits - to avoid double taxation.

Arbitration provision

The OECD Model Tax Convention has since 2008 provided for arbitration in cases where the competent authorities cannot reach an agreement. See Article 25(5).

The arbitration procedure does not apply to the DTCs that Denmark has concluded, since there is no legal basis in Denmark for introducing an arbitration procedure to resolve double taxation disputes.

However, such a provision has been included in some of the more recently concluded DTCs, for example with Israel. The provision will only become effective when a similar provision in a DTC between Denmark and a third state takes effect. This will require an amendment to Danish law.

Denmark has opted to adhere to article 18 about the arbitration clause in chapter IV of the multilateral convention ratified by Denmark in September 2019. The arbitration provision will hereafter be applicable for all DTCs notified by Denmark, when the other contracting state has made the same choice.

Please note

In cases of double taxation resulting from transfer pricing between associated parties in two or more EU Member States, MAP may be initiated on the basis of the rules set out in the EU Arbitration Convention. Under this Convention, taxpayers are in principle guaranteed a resolution of the double taxation through arbitration by an advisory commission. See chapter C.D.11.15.2.3.

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