CfTC publishes updated guidelines on the Mutual Agreement Procedure

On 11 March 2025, the Commissioner for Tax and Customs (the ‘CfTC’) issued updated guidelines (the ‘Guidelines’) on the Mutual Agreement Procedure (‘MAP’).

A MAP is a procedure which allows Malta’s competent authority (the ‘Competent Authority’) to interact with counterparts in contracting states with the aim of resolving international tax disputes. This procedure is possible under the provisions of a MAP article in a double taxation agreement or the EU Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (90/436/EEC).

Competent Authority

The Minister responsible for finance or his authorised representative, as the designated Competent Authority in Malta, is charged with the responsibility to interact with foreign counterparts in any matters arising between Malta and the other jurisdictions in order to resolve any international tax disputes that may arise in relation to the interpretation of the application of a particular convention. In this context, Regulation 8 of the Cooperation with Other Jurisdiction on Tax Matters Regulations, Subsidiary Legislation 123.127 provides that the Minister responsible for finance’s authorised representative shall be the Competent Authority official that is identified as such and whose name and designation are published here.

The Mutual Agreement Procedure 

The Guidelines outline the functioning of the MAP procedure, expected timeline, as well as the possible outcomes of a MAP request.

Formal taxpayer request

The MAP procedure is initiated at the point in time when a taxpayer formally raises the issue in writing with the relevant jurisdiction via the Competent Authority within the deadline stipulated by the applicable convention. A separate request is required for each taxpayer and/or under each convention in instances concerning multiple requests. The Guidelines provide a comprehensive list of the minimum information required for a MAP to be initiated.

Considerations by the Competent Authority following the receipt of a MAP request

Upon receiving the MAP request, the Malta Competent Authority is to evaluate whether the request is justified and whether a unilateral solution may be provided. The guidelines list three general requirements for a request to be considered as justified:

1. The taxpayer must have reasonable grounds upon which to seek assistance from the Competent Authority;
2. The Competent Authority should receive timely notification in writing from a taxpayer or the other contracting state of a proposed adjustment; and
3. In the case of double taxation, this must be more than a mere possibility. 

The Competent Authority is to acknowledge receipt of the request and shall endeavour to accept the request and subsequently, advise the other Competent Authority involved of its decision within 30 days from the date of receipt of the MAP request.

When the Competent Authority determines that the MAP request should be declined, it must first consult with the foreign jurisdiction. If ultimately, it is decided that the MAP request will not be accepted, the Competent Authority must advise the taxpayer in writing wherein it provides reasons for such decision.

Appeal rights

The Guidelines highlight that a taxpayer may request MAP assistance irrespective of any other remedies provided by Maltese domestic law. However, where a request is prompted by action taken by the CfTC under the Income Tax Acts in Chapter 123 and 372 of the Laws of Malta, the Competent Authority is prohibited from derogating from an assessment that has become final and conclusive in accordance with the provisions of Article 38 of the Income Tax Management Act (‘ITMA’) in its MAP, for instances where:

1. The amount of chargeable income has been agreed to under article 33(4) of the ITMA;
2. A decision that has been rendered by the Administrative Review Tribunal following an appeal under article 35 of the ITMA;
3. A decision that has been rendered by the Court of Appeal following an appeal under article 37 of the ITMA.

Commencing and conducting the MAP

If a unilateral solution cannot be offered but the Competent Authority is in agreement with the MAP request, it shall take up the matter with the foreign jurisdiction under the applicable convention.

The MAP process aims to resolve cases within 24 months during which regular updates are provided to the foreign counterpart every 90 days. Moreover, the Competent Authority is to prioritise the preparation of a position paper within 180 days in order to facilitate negotiations with the other Contracting State.

Concluding the MAP

Upon resolving a MAP dispute, the Malta Competent Authority is to communicate the terms of resolution to the taxpayer as soon as possible.

The taxpayer may opt to withdraw from the MAP process and seek alternative appeal remedies if the terms are deemed to be unsatisfactory.

Additional Safeguards

The Guidelines also refer to the suspension of collection of tax during MAP procedures and consideration of interest during a MAP. Furthermore, they place limitations on the use of taxpayer information in order to safeguard the taxpayer’s position.

The guidelines may be accessed here.

Deloitte view

Version 2.4 of the MAP Guidelines introduces one notable revision pertaining to appeal rights. In particular, this version provides that the Competent Authority may not derogate from final assessments in cases where the chargeable income has been agreed upon under article 33(4) of the ITMA, as well as decisions rendered by the Administrative Review Tribunal following an appeal under article 35 of the ITMA or by the Court of Appeal following an appeal under article 37 of the ITMA.