OECD releases Ireland’s Peer Review Report on Action 14 of the BEPS Project

In August 2018, the OECD released Ireland’s Action 14 Peer Review Report. The report evaluated the country’s implementation of minimum standards under Action 14 of the OECD’s BEPS project, related to tax dispute resolution mechanisms. The review spanned two years, over 2016/17, with input from 14 peers, 8 of which had ongoing mutual assistance procedures (MAP) cases with Ireland. Overall, the report found that Ireland meets most elements of the Action 14 minimum standards.

The Report assessed four key areas:

• Preventing disputes;

• Availability and access to MAP;

• Resolution of MAP cases, and

• Implementation of MAP agreements

To achieve full compliance in all four areas, Ireland will need to amend and update certain tax treaties. To this end, Ireland signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion (MLI) in 2017, which will adjust its double tax treaties to achieve the minimum standard requirements. Where treaties are not automatically modified under the MLI, Ireland has adopted a three-pronged approach:

• Ireland wrote to eleven treaty partners that are signatories to the MLI, but with which Ireland did not have a bilateral discussion, with a proposal to include wording either under the MLI or through a bilateral protocol;

• A further nine treaty partners were approached that are not signatories to the MLI to propose to amend the relevant treaty provisions by protocol to be in line with the Action 14 minimum standard, and

• Ireland will include in current renegotiations of tax treaties or protocols with five treaty partners wording to be in line with the Action 14 minimum standard.

The proposed next steps for Ireland under the four key areas are set out below.

1. Preventing Disputes:

Three out of Ireland’s 76 tax treaties do not contain a provision that is equivalent to Article 25(3).
Ireland should therefore ratify the MLI and incorporate the provision in Article 25(3) of the OECD Model Tax Convention (MTC) that requires competent authorities to endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of their tax treaties. These provisions should also be included in all future tax treaties.

In regards to APAs, Ireland is able to rollback bilateral APAs to previous fiscal years. Even though the rollback of APA’s are accepted in Ireland, the requests for rollback of bilateral APAs received are still under consideration and therefore it is not possible at this stage to evaluate the effective implementation of this element in practice.

2. Availability and Access to MAP:

Ireland has published comprehensive, publicly available guidance on the MAP request procedure and has a documented process in place to notify the other competent authority in cases where the objection raised in the MAP request is considered unjustified. Irish Revenue has stated it will provide access to MAP in all eligible cases, including cases concerning whether anti-abuse provisions have been met and cases where taxpayers and tax authorities have reached an audit settlement. As five out of 76 tax treaties do not contain a provision that is equivalent to Article 25(1) of the OECD Model Tax Convention, Ireland should ratify the MLI and incorporate the provisions in Article 25(1) and 25(3) in the MTC which respectively:

• allow taxpayers to request MAP assistance after a period of at least three years after the first notification of actions resulting in taxation not in accordance with the provisions of the tax treaty, and

• allow competent authorities to consult together for the elimination of double taxation in cases not provided for in their tax treaties.

3. Resolution of MAP Cases:

Ireland’s MAP statistics show that it closed 32% of its post-2015 cases in 8.77 months on average. It should aim to resolve the remaining 68% of the cases within a suitable period to achieve an average timeframe of 24 months for all post-2015 cases.

To this end, in line with the minimum standards, Ireland monitors the availability of adequate resources to the MAP function, provides staff in charge of MAP with sufficient authority to conclude cases independently of the audit function, and uses appropriate performance indicators to keep track of the MAP function.

Ireland should ratify the MLI and incorporate the provision in Article 25(2) of the MTC which requires competent authorities, where a justified request is received, to resolve MAP cases by mutual agreement with the relevant competent authorities, should it be unable to arrive at a satisfactory conclusion on its own, and with a view to the avoidance of taxation which is not in accordance with the tax treaty.

4. Implementation of MAP Agreements

Twenty two of Ireland’s 76 double tax treaties do not include the provision in Article 25(2) of the MTC that requires that MAP agreements to be implemented notwithstanding any domestic time limits or be willing to accept alternative treaty provisions that limit the time during which an adjustment can be made.

Ireland should ratify the MLI and incorporate this provision in its tax treaties where required. Additionally, it should ensure that it continues to implement all MAP agreements reached on a timely basis even in the absence of such provisions currently.

For more information in relation to this report, please click here.

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