# Double Taxation Despite the Treaty: MAP, Arbitration and APAs

> Mutual agreement procedure under OECD Model Article 25, MLI Part VI arbitration, EU Directive 2017/1852 and Russian Chapter 20.3: deadlines, odds and pitfalls.

Author: Dana Berzeg — Attorney-at-law, Family Office (https://wiki.private.law/en/authors/berzegova)
Last modified: 2026-08-20T17:17:00.000Z
Canonical: https://wiki.private.law/en/tax-disputes
Topics: investments
Jurisdictions: global, eu, uk, usa
Product tags: tax-regime, compliance
Semantic tags: tax-regime, compliance

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## The concept: the dispute is between two states, not between you and the inspector

A double tax treaty does not apply itself. It allocates taxing rights, but two administrations read it separately and regularly read it differently: one sees a permanent establishment, the other does not; one adjusts the price of an intra-group transaction upwards, the other refuses to make the corresponding downward adjustment; both treat the same individual as their resident. A domestic appeal is structurally powerless in that configuration — you are arguing with one of the two administrations, and winning at home does not cancel the assessment abroad. For precisely this situation every treaty carries a procedural article: the mutual agreement procedure \(MAP\) lifts the dispute to the state-to-state level and, in some regimes, ends in mandatory arbitration. What follows are four regimes of one procedure, plus the preventive track of advance pricing arrangements.

It is worth separating MAP from its neighbour at the outset. Reclaiming over-withheld tax at source and taking a unilateral credit at home are [procedures inside a single jurisdiction](https://wiki.private.law/en/withholding-tax): they work when the treaty has worked but the money left at the domestic rate. MAP is what remains when the treaty has not worked.

## Article 25 of the OECD Model: the addressee, the window, the duty to implement

The request goes neither to a court nor to the tax inspectorate, but to a competent authority — usually the ministry of finance or a dedicated unit within the revenue service. The key change is the 21 November 2017 update to the OECD Model Tax Convention: a case may now be presented to the competent authority of either contracting state, whereas before 2017 it could only go to the state of residence. Treaties concluded on the old formula and never modified keep the restriction, and that is the first thing to check in the actual text.

The window is three years from the first notification of the action resulting in taxation not in accordance with the treaty \(Article 25\(1\)\). Time runs from that first notification, not from the moment an assessment becomes final and not from the exhaustion of appeals: an audit report, an adjustment notice, or even the withholding itself starts the clock.

The second sentence of Article 25\(2\) is the reason the procedure exists at all: an agreement reached by the competent authorities shall be implemented notwithstanding any time limits in domestic law. A domestic limitation period on refunds is no obstacle to the agreement — provided the particular treaty contains that sentence.

Effective dispute resolution is one of the BEPS minimum standards: Action 14 \(the BEPS final reports of 5 October 2015\) set the benchmark of an average of 24 months per case and launched peer review of jurisdictions. On 2 February 2026 the OECD issued an updated Manual on Effective Mutual Agreement Procedures \(MEMAP\), the first full rewrite since the 2007 edition; its recommendations include separating the competent authority organisationally from audit functions and deciding on unilateral relief within four months.

## Domestic appeals running in parallel: what must not be taken to judgment

MAP neither replaces an appeal nor suspends it automatically. The practical fork is to file both and freeze the domestic proceedings. The reason is that in a number of countries a final court judgment binds the competent authority: after it, the authority is no longer free to depart from the court's position, and the negotiating space collapses — the partner either swallows a foreign court's decision whole, or the double taxation stays. Suspension of collection during MAP is likewise a matter of domestic law rather than the treaty: in some jurisdictions it is automatic, in others it requires a separate application and security.

## Mandatory arbitration: Part VI of the MLI

Treaty arbitration under Article 25\(5\) of the OECD Model is triggered where the competent authorities have failed to reach agreement within two years of the case being presented. The Multilateral Convention \(MLI\) of 24 November 2016 built the same logic into the treaty network: Article 19 of the MLI gives the taxpayer the right to require unresolved issues to be submitted to arbitration once the two-year period has run, and Part VI \(Articles 18–26\) sets out the machinery; Part VI has been in force since 1 July 2018. How the MLI overlays treaties at all — matching, Covered Tax Agreements, the PPT and LOB — is covered in the article on the [Multilateral Convention](https://wiki.private.law/en/mli-treaty-shopping); what matters here is one point: Part VI applies only between two jurisdictions that have both opted into it.

The default format is final offer arbitration — also called last best offer, or "baseball" arbitration \(Article 23\(1\) MLI\): each competent authority submits its own proposed resolution to the panel, the panel picks one of the two by simple majority, and it gives no reasons. Moving to the independent opinion format — a reasoned decision — is possible only through a reservation \(Article 23\(2\)\). The difference is practical: "baseball" forces both sides to submit moderate positions, because the extreme one loses by construction. British practice records the outcome plainly: three parallel sources of arbitration exist \(Part VI of the MLI, the European Arbitration Convention and treaty-specific Article 25\(5\) clauses\), yet agreement is normally reached at the MAP stage and cases do not reach the commission \([HMRC International Manual, INTM423080](https://www.gov.uk/hmrc-internal-manuals/international-manual/intm423080)\). Arbitration works as a threat rather than as a procedure.

Who is inside. The OECD maintains individual arbitration profiles only for jurisdictions that have adopted Part VI; published profiles include the Netherlands and New Zealand \(as at 29.09.2025\), Finland \(26.05.2025\), the United Kingdom \(31.05.2024\), Canada \(16.12.2022\), France \(16.09.2022\), Austria and Malta \(28.06.2022\) and Barbados \(25.03.2021\). The exact number of Part VI participants shifts and is reported inconsistently in secondary commentary — it has to be verified against the current OECD Signatories and Parties table. What is stable is something else: Part VI was chosen by a minority of MLI signatories, predominantly developed economies. India objects consistently to mandatory arbitration, and Russia has taken no Part VI position at all — for Russian treaty pairs there is no arbitral exit from MAP in principle.

## Directive \(EU\) 2017/1852: the only hard timetable

Inside the EU the procedure is regulated by the calendar. The complaint is submitted within three years of receiving the first notification of the disputed action, and it goes simultaneously to every affected competent authority; those authorities acknowledge receipt within 2 months and decide on admissibility within 6 months \(Article 3 of [Council Directive \(EU\) 2017/1852 of 10 October 2017](https://eur-lex.europa.eu/eli/dir/2017/1852/oj)\). Then comes MAP: 2 years from the last notification accepting the complaint, extendable by a further 1 year at a competent authority's request \(Article 4\). If no agreement is reached, an advisory commission is set up at the taxpayer's request, no later than 120 days from receipt of that request \(Article 6\); the commission delivers its opinion within 6 months of being set up, extendable by a further 3 months \(Article 14\); the competent authorities must then agree on the resolution within 6 months of notification of the opinion \(Article 15\).

The finish line has a price. The final decision takes effect only if the taxpayer accepts it and renounces domestic remedies, declaring this within 60 days of being notified of the decision \(Article 15\). Before signing you have to weigh the directive outcome against the chances in a domestic court — with no right to change your mind.

The directive applies to complaints submitted from 1 July 2019 onwards, concerning income or capital for tax years beginning on or after 1 January 2018 \(Article 23\). The standard rules of functioning of the advisory commission and the arrangements for publishing final decisions are set out in [Commission Implementing Regulation \(EU\) 2019/652 of 24 April 2019](https://eur-lex.europa.eu/eli/reg_impl/2019/652/oj). The European Commission publishes annual statistics across the four stages of the procedure — complaints, MAP, arbitration and final decisions; data are available for 2020–2024.

The outer limits of the directive are currently being tested before the Court of Justice: on 21 July 2025 a preliminary reference from the Administrative District Court of Latvia \(Administratīvā rajona tiesa\) was lodged — Case C-497/25, UAB Maxima LT v Valsts ieņēmumu dienests \(details verified against the official publication of the reference, CELEX 62025CN0497\) — with two questions — whether a competent authority is obliged to set up an advisory commission under Article 6\(1\)\(b\) where no agreement is reached in time, and whether the directive covers the situation in which the same income enters the tax base of two states but is exempt in one of them. As at 20 August 2026 the case is undecided.

## The Russian track: Chapter 20.3 of the Tax Code and Order No. 102n

In Russia the procedure arrived late and in truncated form. Methodological guidance came before the statute: the Ministry of Finance published its Guidance on Conducting the Mutual Agreement Procedure on 30 January 2019. Federal Law No. 325-FZ of 29.09.2019 then inserted Chapter 20.3 \(Articles 142.7–142.9\) into Part One of the Tax Code, and the procedure and deadlines were fixed by Order of the Ministry of Finance of Russia No. 102n of 11.06.2020, in force from 11 October 2020: the application goes to the Ministry of Finance within three years of service of the tax audit report or an equivalent document, the ministry considers it within 90 days and either decides to run the procedure or issues a reasoned refusal.

What is left of it. Presidential Decree No. 585 of 8 August 2023 suspended the distributive articles in treaties with 38 states — in the various schedules this means Articles 5–22, 23, 24 and individual protocol provisions — while the mutual agreement procedure article did not make it into most of those schedules \(there are exceptions: for Switzerland the schedule captured Article 25b, for Cyprus Articles 27 and 29\). Formally the procedure is alive; substantively there is little left to argue about, because the suspended provisions are precisely the ones from which characterisation conflicts arise. The schedule-by-schedule detail is in the analysis of the [suspension of Russian tax treaties](https://wiki.private.law/en/russia-tax-treaties-suspension). Some partners have gone further: the United Kingdom suspended the convention in its entirety, giving notice on 4 February 2025 \(effective from 1 April 2025 for corporation tax and from 6 April 2025 for income tax and capital gains tax\), and Germany notified Moscow on 30 June 2026 of the suspension of the 29 May 1996 treaty with effect from 1 January 2027. There are no published Ministry of Finance statistics on Chapter 20.3, and as at 20 August 2026 no official clarification has been found on whether Article 25 operates in pairs where the partner responded with a mirror suspension.

## Four regimes of one procedure

| **Parameter** | **Article 25 OECD Model** | **Part VI MLI** | **Directive \(EU\) 2017/1852** | **Chapter 20.3 Russian Tax Code** |
| Where to file | Competent authority of either state \(2017 version\) | Through MAP under the covered treaty | Simultaneously to every affected competent authority | Ministry of Finance of Russia |
| Filing window | 3 years from first notification | Per the covered treaty's rules | 3 years from first notification | 3 years from service of the audit report |
| Time to agree | Action 14 benchmark of 24 months, not binding | 2 years before the right to demand arbitration | 2 years + 1 year extension | 90 days to decide whether to open the procedure |
| Arbitration | Only where an Article 25\(5\) clause exists | Yes, default is final offer \(Article 23\(1\)\) | Advisory commission: 120 days to constitute, 6 + 3 months for the opinion | None |
| Price of the final decision | Implementation outside domestic time limits \(Article 25\(2\)\) | Decision binding on the authorities | Acceptance plus renunciation of domestic remedies within 60 days | — |

## Three disputes — one procedure, different odds

A dispute over an individual's residence runs down the ladder in Article 4 of the treaty and comes to rest on MAP as the final rung, once permanent home, centre of vital interests, habitual abode and nationality have failed to untie the knot — the mechanics of that ladder are set out in the article on [resolving dual residence](https://wiki.private.law/en/tax-residency-tiebreaker). The distinctive feature of this category is that it usually has no arbitral exit: many Part VI jurisdictions expressly carve individual residence cases out of the arbitral scope, or make them conditional on both competent authorities agreeing.

A transfer pricing dispute is the opposite case: it runs longest of all, requires a corresponding adjustment by the second administration, and is the reason the arbitral machinery was built in the first place. A permanent establishment dispute sits in between: the facts are contested, but the size of the adjustment is usually smaller and agreement comes more easily. What all three share is that the basis for the assessment often lies in [economic substance](https://wiki.private.law/en/economic-substance), while the procedure for disputing it is one and the same.

## APAs: how to avoid reaching a dispute

The preventive track is the advance pricing arrangement \(APA\): the transfer pricing methodology is agreed with the administration in advance, for several years ahead, often with roll-back to prior open periods. A unilateral APA protects against one administration only and does not by itself remove double taxation; bilateral and multilateral APAs do, but they run through the same competent authorities and along the same negotiating rails as MAP.

On the OECD's 2024 figures, 80 jurisdictions allow bilateral APAs, against 73 in 2023, and 49 are actively handling cases. The average time to conclude an APA rose to 39.6 months from 36.8 months a year earlier, while the share of withdrawals and closures without agreement climbed from 12% to more than 19%. The American picture is more granular: under [Announcement 2026-8 of 30 March 2026](https://www.irs.gov/pub/irs-drop/a-26-08.pdf), the APMA programme executed 110 APAs in 2025 \(14 unilateral, 90 bilateral, 6 multilateral\) and accepted 178 complete applications \(23, 153 and 2 respectively\); as at 31 December 2025 the queue stood at 622 applications, of which 310 were renewals. A new bilateral APA took on average 50.0 months, with a median of 46.4; across all new and renewal APAs the average was 44.1 months, median 41.6. The largest US treaty partners were India, with 26% of applications filed and 35% of bilateral APAs executed, and Japan, with 24% and 25%. Filing and administration are governed by [Rev. Proc. 2015-41](https://www.irs.gov/pub/irs-drop/rp-15-41.pdf), and the model APA text was left unchanged in the 2025 report.

The conclusion the numbers point to is simple: an APA is not a fast route but a way of moving the dispute several years forward and conducting it in negotiating rather than adversarial mode. If the structure's horizon is shorter than four years, the economics of a bilateral APA do not add up.

## How long it takes and how it ends

On the OECD's 2024 MAP statistics \(published for Tax Certainty Day in October 2025\) the average time to close a case is 27.4 months: 30.9 months for transfer pricing cases against 32 months in 2023, and 24.5 months for other cases against 23.4 months a year earlier. Transfer pricing is speeding up; the other categories are slowing down.

The headline figure is the outcome. Around 73% of cases closed in 2024 ended in full resolution of the issue, and only around 4% closed with no agreement at all. The inventory has stopped being a swamp too: cases older than 2016 make up 3.3% of the closing 2024 balance, cases older than four years less than 20%, and cases under two years old more than 56%. National figures can beat the average: on HMRC's data the average time to close a UK case in the 2024/25 financial year was 24.8 months.

What that means for the go or no-go decision: MAP is not a lottery. Three quarters of cases end with double taxation eliminated, and only one in twenty-five ends in nothing. The price is two and a half years and professional support on both sides.

## Common mistakes

Missing the three-year window. Time runs from the first notification, not from the assessment becoming final; waiting for the appeal to end almost guarantees the deadline is eaten.

Taking the domestic case to judgment. In a number of countries a domestic court judgment binds the competent authority — after it, negotiation is pointless. File the appeal, but freeze it.

Filing only in the state of residence. The "either competent authority" formula appeared in the 2017 OECD Model; in older unmodified treaties it does not apply, and filing with the wrong authority costs time you cannot recover.

Renouncing domestic remedies without doing the maths. The 60 days under Article 15 of the EU directive are a choice between the commission's decision and the domestic court, not a formality.

Counting on arbitration with a counterparty outside Part VI. What has to be checked is the position of both jurisdictions, not the bare fact that the MLI was signed.

Paying the assessment without applying to suspend collection. Suspension during MAP is governed by domestic law and in many jurisdictions is not automatic.

> 🍓 When the treaty has not worked, what remains is the procedural layer above it. The request goes to a competent authority — under Article 25\(1\) of the OECD Model within three years of the first notification; under the EU directive simultaneously to every affected authority on a hard timetable \(2 months, 6 months, 2 + 1 years, 120 days, 6 + 3 months, 6 months, 60 days\); in Russia to the Ministry of Finance under Order No. 102n, with an answer within 90 days. The average time to close a case in 2024 was 27.4 months, around 73% of cases ended in full elimination of double taxation and only 4% closed without agreement. Part VI MLI arbitration exists mainly as a threat: cases almost never reach a panel, and for Russian pairs it does not exist at all. The working rule: file MAP in time, freeze the appeal, never let it run to judgment, and where the structure repeats, run the numbers on a bilateral APA — 39.6 months on average across the OECD and a 46.4-month median for new bilateral APAs in the United States.

## Questions and answers

### **Do I have to exhaust the domestic appeal first and only then file for MAP**

No, and doing so is usually a mistake. MAP does not require exhaustion of domestic remedies, and the three-year window under Article 25\(1\) of the OECD Model runs from the first notification of the action, not from a final court decision. The standard tactic is to file with the competent authority in time, lodge the domestic appeal to preserve your rights, and then freeze it: in a number of countries a final court judgment binds the competent authority and strips it of the freedom to negotiate.

### **Does MAP guarantee that double taxation will be eliminated**

It does not guarantee it, but the statistics are better than the procedure's reputation. On the OECD's 2024 data, around 73% of closed cases ended in full resolution of the issue and only around 4% closed with no agreement at all, at an average of 27.4 months. A binding outcome appears only where arbitration exists: Part VI of the MLI between two jurisdictions that have both adopted it, an Article 25\(5\) clause in the particular treaty, or an advisory commission under the EU directive.

### **Does the mutual agreement procedure still work under Russian treaties after 2023**

Legally, the mutual agreement procedure article did not make it into most of the schedules to Decree No. 585 of 08.08.2023 and formally remains in force, with the domestic mechanics fixed by Chapter 20.3 of the Tax Code and Ministry of Finance Order No. 102n. In practice the field has narrowed: what was suspended is exactly the distributive articles from which characterisation conflicts arise, some partners have suspended their conventions in full, there is no arbitral exit, and no public statistics on the use of Chapter 20.3 are published.

### **Is a bilateral APA worth doing instead of waiting for a dispute**

Yes, if the structure repeats and the horizon is long enough. The average time to conclude an APA on the OECD's 2024 statistics is 39.6 months, and for new bilateral APAs in the United States the median is 46.4 months against a queue of 622 applications as at 31 December 2025. With a horizon shorter than four years it is better value to prepare documentation for an ordinary audit; with a long-lived structure an APA usually allows roll-back to prior open periods and clears the risk for several years at once.

### **Where do I go if the double taxation arises from an individual's residence**

Down Article 4 of the treaty: permanent home, centre of vital interests, habitual abode, nationality — and only then MAP as the final rung. It is in this category that arbitration is most often unavailable: many jurisdictions that adopted Part VI of the MLI exclude individual residence cases from the arbitral scope or make them conditional on both competent authorities agreeing, so the procedure stays a negotiation and, on timing, sits closer to the 24.5 months reported for "other cases".

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## FAQ

### Do I have to exhaust the domestic appeal first and only then file for MAP

No, and doing so is usually a mistake. MAP does not require exhaustion of domestic remedies, and the three-year window under Article 25(1) of the OECD Model runs from the first notification of the action, not from a final court decision. The standard tactic is to file with the competent authority in time, lodge the domestic appeal to preserve your rights, and then freeze it: in a number of countries a final court judgment binds the competent authority and strips it of the freedom to negotiate.

### Does MAP guarantee that double taxation will be eliminated

It does not guarantee it, but the statistics are better than the procedure's reputation. On the OECD's 2024 data, around 73% of closed cases ended in full resolution of the issue and only around 4% closed with no agreement at all, at an average of 27.4 months. A binding outcome appears only where arbitration exists: Part VI of the MLI between two jurisdictions that have both adopted it, an Article 25(5) clause in the particular treaty, or an advisory commission under the EU directive.

### Does the mutual agreement procedure still work under Russian treaties after 2023

Legally, the mutual agreement procedure article did not make it into most of the schedules to Decree No. 585 of 08.08.2023 and formally remains in force, with the domestic mechanics fixed by Chapter 20.3 of the Tax Code and Ministry of Finance Order No. 102n. In practice the field has narrowed: what was suspended is exactly the distributive articles from which characterisation conflicts arise, some partners have suspended their conventions in full, there is no arbitral exit, and no public statistics on the use of Chapter 20.3 are published.

### Is a bilateral APA worth doing instead of waiting for a dispute

Yes, if the structure repeats and the horizon is long enough. The average time to conclude an APA on the OECD's 2024 statistics is 39.6 months, and for new bilateral APAs in the United States the median is 46.4 months against a queue of 622 applications as at 31 December 2025. With a horizon shorter than four years it is better value to prepare documentation for an ordinary audit; with a long-lived structure an APA usually allows roll-back to prior open periods and clears the risk for several years at once.

### Where do I go if the double taxation arises from an individual's residence

Down Article 4 of the treaty: permanent home, centre of vital interests, habitual abode, nationality — and only then MAP as the final rung. It is in this category that arbitration is most often unavailable: many jurisdictions that adopted Part VI of the MLI exclude individual residence cases from the arbitral scope or make them conditional on both competent authorities agreeing, so the procedure stays a negotiation and, on timing, sits closer to the 24.5 months reported for "other cases".

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## Factual claims

- The window is three years from the first notification of the action resulting in taxation not in accordance with the treaty (Article 25(1)).
- The second sentence of Article 25(2) is the reason the procedure exists at all: an agreement reached by the competent authorities shall be implemented notwithstanding any time limits in domestic law.
- Effective dispute resolution is one of the BEPS minimum standards: Action 14 (the BEPS final reports of 5 October 2015) set the benchmark of an average of 24 months per case and launched peer review of jurisdictions.
- Treaty arbitration under Article 25(5) of the OECD Model is triggered where the competent authorities have failed to reach agreement within two years of the case being presented.
- The directive applies to complaints submitted from 1 July 2019 onwards, concerning income or capital for tax years beginning on or after 1 January 2018 (Article 23).
- On the OECD's 2024 figures, 80 jurisdictions allow bilateral APAs, against 73 in 2023, and 49 are actively handling cases.

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