The landscape of international tax law is evolving as cross-border business expands and tax authorities focus on protecting revenue. Disputes have become more common, driven by increased international activity, complexity in tax rules, and new policy developments. These issues were explored in depth by speakers Natalia Quinones (moderator), Jonathan Schwarz (author of Schwarz on Tax Treaties), and Scott Wilkie during the expert webinar ‘Effective Resolution of International Tax Disputes’. The session examined current approaches to resolving these challenges, emphasizing the Mutual Agreement Procedure (MAP), recent OECD and UN updates, and the layering of legal remedies and best practices.
Here are the essential takeaways for tax professionals navigating this fast-changing field.
The Role and Structure of the Mutual Agreement Procedure (MAP)
MAP sits at the heart of resolving cross-border tax disputes and is often called the “engine” of tax treaties. Its main purpose is to ensure countries can reconcile their tax systems and avoid double taxation by providing a formal process for negotiation and agreement. MAP can be initiated by taxpayers (Article 25(1)) and follows a five-step structure:
- Taxpayer presents the case if they consider taxation is or will be contrary to the treaty. No extensive requirements apply, what matters is a reasonably arguable case, not proof.
- The receiving authority must promptly determine if the claim is justified. If not, the reason must be clear.
- That authority considers whether it can resolve the dispute on its own, aiming for a satisfactory and pragmatic solution, not just one strictly following domestic law.
- If not resolved unilaterally, both authorities must endeavor to resolve the issue by mutual agreement.
- If an agreement is reached, it binds both states (regardless of domestic deadlines), and the taxpayer can choose whether to accept it or pursue other remedies.
MAP can also be initiated competent authorities to resolve doubts or difficulties in applying treaties and to deal with double taxation not covered by the treaty (Article 25(3)).
According to OECD statistics, MAP case volume continues to increase, with 5,747 open cases and 2,385 closed at the end of 2024. EU-specific solutions include the Arbitration Convention (2,213 cases at the end of 2023) and the Dispute Resolution Directive (209 cases at the end of 2023).
The “endeavour” to resolve disputes obligation built into Article 25 is meaningful. The Vienna Convention on the Law of Treaties requires authorities to act in good faith and work toward practical resolutions, not simply claim to have tried. This strengthens MAP’s effectiveness and sets clear expectations for treaty partners.
OECD’s 2026 Manual on Effective MAP and BEPS Action 14
To tackle the rising volume of disputes and promote better outcomes, the OECD released the updated Manual on Effective MAP (ME MAP) for 2026. This manual is both practical and aspirational: it sets out 50 best practices for tax authorities and nine for taxpayers, aligns with the BEPS Action 14 Final Report, and supports the OECD Model Commentary and Transfer Pricing Guidelines.
Key best practices include suspending collections during MAP, publishing guidance on MAP’s relationship to domestic and administrative remedies, implementing bilateral Advance Pricing Agreement (APA) programs, and providing for multi-year MAP resolutions. These standards are not binding, but they have rapidly become a reference point for effective, consistent and transparent, dispute resolution.
BEPS Action 14 also sets out minimum standards: MAP must be available and accessible in good faith, resolved within 24 months where feasible, and supported by transparent reporting and OECD peer review. As these best practices and standards take hold, they are shaping a common international approach, even if countries interpret details differently.
Arbitration and Alternative Remedies
If competent authorities fail to reach agreement within two years, taxpayers may require arbitration (Article 25(5); MLI Art 19(1)), unless a domestic court has already decided the issue. The slide deck makes clear that arbitration is a backstop and is usually excluded if domestic court decisions address the case in dispute. Certain countries support mandatory arbitration to speed up resolution, but others are cautious, citing issues like cost, constitutional limitations, and power asymmetries.
This split means there is growing support for alternative dispute resolution approaches, including mediation, conciliation, and institution-based solutions. The OECD, UN, and other bodies now encourage countries to integrate these tools for flexibility and confidence-building in cross-border tax administration.
Key Case Law: Oracle Corporation Australia and Carulla Font
Oracle Corporation Australia Pty Ltd v Commissioner of Taxation [2025] FCAFC 145
This case illustrates the issues that can arise when MAP and domestic court proceedings overlap. The Australian Tax Office (ATO) treated software distribution payments as royalties, while the taxpayer argued for business profits. After the taxpayer triggered MAP, the ATO issued an assessment and opposed a stay of a domestic appeal. The court agreed with the taxpayer, holding that domestic proceedings should be stayed until the MAP (and potential arbitration) concluded. The outcome reinforces key principles: taxpayers should have a genuine choice of remedy, and MAP typically takes precedence over litigation, echoing the minimum standards and best practices articulated by the OECD and BEPS Action 14.
Carulla Font v HMRC [2025] EWHC 3057 (Admin)
This case concerned an individual resident in both Spain and the UK. When the taxpayer entered MAP to resolve dual residency and no agreement had been reached. The UK authority’s stance on residency changed during the process, causing the taxpayer to seek judicial review of the UK competent authority’s new position. The court found that actions taken under MAP are open to judicial review as part of a public function, but the scope is limited when suitable alternative remedies exist. Critically, the case highlighted that domestic legal safeguards remain available within MAP and reinforce good administrative conduct.
The Future: Developments and Alternative Dispute Resolution
Several important international developments will shape future tax dispute resolution:
- The OECD Model 2025 update introduces Article 25(6), clarifying MAP’s interaction with dispute resolution mechanisms under the General Agreement on Trade in Services.
- The UN Framework Convention is designing early protocols for tax dispute prevention and resolution, addressing challenges like “no-treaty” cases, transfer pricing, and optional institutional solutions.
- A range of alternative dispute resolution (ADR) mechanisms, mediation, conciliation, and advisory panels, are gaining acceptance, especially when binding arbitration is difficult to implement or not politically feasible.
ADR methods are now recognized as valuable options that build confidence in the process and help overcome deadlocks, especially where sovereignty, administrative discretion, or cost present obstacles. There’s strong encouragement for tax authorities and taxpayers to consider mediation and conciliation early and often, either within or alongside MAP.
Conclusion
Resolving international tax disputes has become a central aspect of global tax compliance. With the OECD’s new MEMAP guidance, BEPS Action 14 standards, evolving model treaty language, and new frameworks from the UN, tax the rapid change compels professionals to remain up-to-date in this area of international taxation. The MAP remains critical, but the landscape is now enhanced with practical best practices, recourse to arbitration, judicial review, and increasingly, the mainstreaming of mediation and conciliation. These trends together aim to provide fair, timely, and predictable outcomes for increasingly complex cross-border tax cases.
Stay informed and ahead of change in the dynamic field of international tax law with timely, authoritative insights from Kluwer International Tax Law.
