The Ministry of Finance published the Explanation regarding Mutual Agreement Procedure (“MAP”) as per Double Taxation Avoidance Treaties (“DTTs”).
MAP as per DTTs is an international procedure which provides a unique application of DTTs. This procedure is a unique instrument used for solving international tax disputes and regulated by existing DTTs (usually it is prescribed in Article 25 – Mutual Agreement Procedure).
In accordance with provisions of DTT in question, the competent authority of the Republic of Serbia is entitled to communicate with the competent authority of another contracting country, to reach an agreement of taxation in Serbia or another contracting country.
MAP is initiated based on the request of the competent authority. The competent authorities are obliged only to strive to solve the case by joint negotiation, which does not mean that such agreement will and must be achieved. The purpose of MAP of competent authorities is to enable the realization of the rights from the DTT for the entity on which the regulations of international agreements are applied, according to the legal system of contractual countries.
In Serbia, the Ministry of Finance is competent for providing assistance with respect to MAP in DTTs. This assistance is free of charge. The taxpayers do not take part in the procedure of joint negotiation between competent authorities even if the procedure starts upon their request. They are expected to cooperate fast and effectively with the competent authority, during the MAP. The notifications that are exchanged during the MAP are considered as a tax secret.
The request must be submitted right after the first notification of measurement in Serbia or another contractual country which leads to taxation which is incompatible with provisions of DTT.
The request for initiation of a MAP can be submitted by entity concerning DTT in question. The request is submitted to the competent authority of the country of residence of the entity concerning DTT in question. In Serbia, requests in written form are being sent to the Ministry of Finance – fiscal system department. The request, as well as appropriate documentation, will be submitted in written form on the Serbian language, but it is preferred to submit the request in English as well.
In the case of double tax residency, the request is submitted in the contractual country in which the entity considers to be a tax resident. If the taxpayer changes its residency status in order to avoid double taxation in accordance with international agreements, the request will be submitted to the competent authority of the country where the taxpayer was resident in the moment of crystallization of tax liability.
Submission of request for starting MAP does not postpone the execution of the decision on tax liability.
Stipulations prescribed by DTTs have priority compared to the regulations in tax laws and other laws of the Republic of Serbia.
If the competent authority estimates that all material terms for conducting the procedure are fulfilled, it starts the bilateral phase MAP with the competent authority contracting state. In specific cases, the procedure can be finished one-sided – by using appropriate legal means of Serbian legislation. MAP is being proceeded directly between competent authorities of two countries.
Since the content of such international procedure is consultative nature, the taxpayers are not participating by themselves. They are only provided with information about the result of the procedure, usually, 2 months after the agreement was concluded. In specific cases, the MAP can last longer.
The opinions are exchanged in written form. If it is necessary to provide additional explanation of the circumstances of the concrete case, the taxpayer must cooperate proactively, transparently and in good faith with the competent authority, as well as provide it with all necessary information and documentation. The taxpayer cannot ask form the competent authority to partially apply the Decision brought in the procedure of joint negotiation.
For additional questions, you can contact our tax team at firstname.lastname@example.org.