MAP scope

The MAP is governed by the bilateral tax convention entered into by France with another Contracting State. To date, France is bounde by more than 120 conventions. Moreover, with regard to EU countries, France is also bound by the European Union Arbitration Convention of 23 July 1990 and EU Directive 2017/1852 of 10 October 2017 on Tax Disputes Resolution Mechanisms.

The purpose of MAP is to remedy either double taxation or taxation that is not in accordance with the relevant convention. Double taxation may be juridical (when the same taxpayer is taxed on the same income in two States) or economic (when taxation of the income of a taxpayer in one State duplicates taxation of the income of a related taxpayer in another State. This is particularly common for the transfer of profits between companies belonging to the same group).

Any individual or legal entity resident of either State which is party to the convention may apply for a MAP.

The MAP only covers taxes that are explicitly mentioned in the convention: income tax, corporation tax, corporate surtax, general social security contribution, social security debt repayment contribution, wealth tax, death duties, accordingly.

Hence, interest on arrears, penalties and surcharges are not covered by the MAP.

Applying for MAP

In most cases, MAP may be requested when the taxpayer “considers that the actions of one or both of the Contracting States result or will result for him in [double taxation or] taxation not in accordance with the provisions of this Convention”.

As a result, the MAP is contingent on a prior administrative measure. In France, this administrative measure may be:

• A notice of proposed adjustments

• A notice of the tax bases or items for estimated assessments

• A withholding tax levy

Depending on the wording of the Convention, the case must be filed with the competent authority of the Contracting State in which the taxpayer is a resident or with the competent authority of either State, within a time limit of usually three years (from three months to no deadline at all).

To be admissible, the application should contain the following information and documents:

• First name, surname, postal and email addresses

• Detailed information on the facts and circumstances having led to the double taxation or taxation which is non-compliant with the convention

• Details of the years and taxes concerned by the double taxation or taxation which is non-compliant with the convention

• Copies of the tax notices and adjustment proposals or equivalent documents having led to the alleged double taxation or taxation which is non-compliant with the convention

• Details of administrative remedies instituted and any court judgment concerning the case

• A declaration under which the taxpayer undertakes to reply as comprehensively and rapidly as possible to all reasonable and appropriate requests from the competent French authority

The competent authorities may refuse to enter into MAP when:

• The taxpayer has not provided concrete evidence of the double taxation

• The administrative measures causing the double taxation included serious penalties that have become final

• The taxpayer at first sought to get around the provisions laid down in the bilateral convention by himself correcting the income or profits declared in a State on the grounds that the other State made an adjustment concerning the same income or profits 
   

MAP phases

In OECD Member countries, the average timeline for processing MAPs is approximately two years.

The MAP includes an initial written phase between the relevant competent authorities during which the tax authorities set out their respective positions, followed by a second phase of negotiations during Competent Authorities meetings.

As the MAP is a semi-diplomatic process, the taxpayer is not entitled to consult the written exchanges between the States’ competent authorities and does not take part in the negotiations themselves.

At the end of the MAP, the competent authority to which the case was initially referred by the taxpayer advises the latter of the outcome decided on by the authorities of both States.

If the taxpayer accepts the solution put forward, they are asked to refrain from any administrative or judicial remedy challenging both the substance and form of the disputed taxation so as to avoid any risk of dual exemption.

If the taxpayer rejects the proposal or fails to reply, the solution reached by the authorities of both States will lapse and the taxpayer’s situation may be settled in each State on the basis of its interpretation of its legislation and the convention.

Absent an arbitration clause in the Tax Convention, the competent authorities only have an obligation of due diligence. Should the States fail to reach an agreement, the mutual agreement procedure is terminated without eliminating the double taxation. In this case, the taxpayer’s situation will be settled in each State.