MAP statistics published for 2020 – Transfer pricing related MAP cases in Finland increased significantly
It is delightful that all the transfer pricing related cases resolved in Finland in 2020 received a positive outcome where the double taxation was fully eliminated or where a unilateral relief was granted.
29 Nov 2021
The OECD has released the latest mutual agreement procedure (“MAP”) statistics covering 118 jurisdictions and practically all MAP cases worldwide. The mutual agreement procedure is a means through which the competent authorities of two or more countries can negotiate with one another with a purpose to resolve disputes regarding interpretations of the tax treaties and to eliminate double taxation. Dispute resolution mechanisms, including MAPs, are the cornerstone of a well-functioning tax treaty network.
The 2020 MAP Statistics play an important role in the monitoring of BEPS Action 14, providing an objective and global frame of reference, as well as a country specific view, which together allow measurement of progress but also show where further work is needed. The 2020 MAP Statistics show the following trends globally and in Finland:
- MAP remains very concentrated. Globally, around 2500 new cases were started in 2020 of which around 1200 were transfer pricing cases. The top 25 jurisdictions account for 95% of them and the remaining cases involving around 40 other jurisdictions.
- Number of new cases increased. The number of started transfer pricing cases has kept increasing (almost +15%) (see trends since 2016), while the number of other cases has slightly decreased compared to 2019 (-2%). In Finland, 39 transfer pricing cases were started during 2020. This is significantly more than the 10 transfer pricing cases that were started in 2019.
- Slight decrease in cases closed. Approximately 5% fewer MAP cases were closed globally in 2020 than in 2019, which is mainly due to a decrease of other cases (-12%), while the number of transfer pricing cases closed has increased (+6%). Competent authorities were still able to close a significant number of cases in 2020, because they adapted to the changing landscape and replaced physical meetings with other forms of communication, e.g., digital meetings. In Finland, total amount of closed cases in 2020 was 39 of which 18 were transfer pricing cases. This is somewhat smaller amount than 46 cases closed in 2019. However, the number of closed transfer pricing cases has not changed as the amount was 18 in 2019.
- Outcomes are generally positive. Globally, around 75% of the MAPs concluded in 2020 fully resolved the issue both for transfer pricing and other cases (compared to 85% for transfer pricing cases and 71% for other cases in 2019). The number of cases withdrawn by taxpayers nearly doubled in 2020 (11% compared to 6% in 2019). In Finland, 56% of transfer pricing cases were resolved in a way that fully eliminated double taxation and in 33% of the cases, unilateral relief was granted. 11% of the cases were withdrawn by the taxpayer (decreased from 17% in 2019).
- Cases still take a long time. On average, MAP cases closed in 2020 took 35 months for transfer pricing cases (31 months in 2019) and approximately 18 months for other cases (22 months in 2019). In Finland, the average time to close the cases in 2020 was approximately 17 months for transfer pricing cases that were started after 1 January 2016. This has slightly increased from average time to close transfer pricing MAP cases in 2019 which was less than 16 months. In addition, there is still 7 pending MAP cases in Finland that have been started already before 1 January 2016.
- MAP partners of Finland. The partners with which Finland has pending MAPs have remained the same to a large extent between 2019 and 2020. In transfer pricing cases, the partners with most MAP cases in 2020 were Sweden, Italy, Spain and Germany (in 2019 the partners with most MAP cases were Sweden, Italy, Denmark and Germany). Especially the number of new cases with Sweden has increased significantly from 6 in 2019 to 17 in 2020.
Deloitte is assisting its clients in MAP procedures as a standard practice. Please contact our dedicated transfer pricing team members to discuss more!