Income Tax Treaties: Competent Authority Functions and Procedures of Selected Countries (H-K) (Portfolio 6890)

Tax Management Portfolio, Income Tax Treaties: Competent Authority Functions and Procedures of Selected Countries (H–K), No. 6890, discusses the competent authority functions and procedures of India, Ireland, Italy, and Korea. To view this Portfolio, visit Bloomberg Tax for a free trial.

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Description

Tax Management Portfolio, Income Tax Treaties: Competent Authority Functions and Procedures of Selected Countries (H–K), No. 6890, discusses the competent authority functions and procedures of India, Ireland, Italy, and Korea. Each chapter initially focuses on the mutual agreement procedure that is available to taxpayers subject to double taxation, and in that connection discusses such topics as the basic procedure for requesting competent authority relief, statute of limitations issues, the role of Appeals (if any), the small case procedure (if any), interest on deficiencies and refunds, and the possibility of arbitration. If a country also has procedures for Advance Pricing Agreements, those are also considered.

Each chapter then discusses the procedures relating to consultation between competent authorities regarding the interpretation or application of an income tax treaty, exchange of information, and assistance in collection. With respect to exchange of information, each chapter also considers procedures under any tax information exchange agreements to which the country is a party.

For competent authority functions and procedures of the United States, see 940 T.M., U.S. Income Tax Treaties — U.S. Competent Authority Functions and Procedures.

This Portfolio may be cited as Gandhi, et al., 6890 T.M., Income Tax Treaties: Competent Authority Functions and Procedures of Selected Countries (H–K).

Authors

Samir Gandhi

Samir Gandhi is a partner with the Deloitte Transfer Pricing group in India and is based in the Mumbai office. He has more than 20 years of experience in the fields of direct taxes, international taxation, transfer pricing, and indirect tax. Samir attends to the transfer pricing matters of some of the largest clients of the Mumbai office, both multinationals as well as large Indian corporates, and also coordinates matters with other offices in India and Deloitte's Global Transfer Pricing group.

Rakesh Alshi

Rakesh Alshi is a partner with the Deloitte Transfer Pricing group in India and is based in the Mumbai office. He has more than ten years of experience in the fields of transfer pricing and international taxation. He worked in the Deloitte Chicago office for more than a year and has had various involvements with other Deloitte offices, including in the United States, the United Kingdom, and Australia. Prior to joining Deloitte, Rakesh was a Senior Manager – Taxation with a multinational corporation, Kvaerner Cementation India Limited, and was the head of its Foreign Exchange and Tax Department. Rakesh has contributed articles on transfer pricing and international taxation to the Economic Times, Financial Express, Kokusai Zhimo, Japan, and the Bureau of National Affairs, USA.

Kavita Sethia Gambhir

Kavita Sethia Gambhir is a Senior Manager (Transfer Pricing) with Deloitte in the Mumbai office. She has more than ten years of experience in the fields of transfer pricing, direct taxes, and international taxation. Kavita advises on the transfer pricing matters of some of the largest clients of the Mumbai office, both multinationals as well as large Indian corporates, and coordinates matters with other offices in India and Deloitte's Global Transfer Pricing group. She has considerable experience in planning and documenting the transfer pricing of companies across a wide spectrum of industries, including the manufacturing, gems, pharmaceuticals, financial services, automobile, computer hardware and software, and branded consumer products industries. Kavita has successfully defended several clients in audits conducted by the Indian tax authorities on transfer pricing issues and has represented clients before the Advance Pricing Agreement (APA) authority in India. Kavita has contributed to publications on transfer pricing law and practice in India and has presented at external fora, such as Achromic point, Bombay Chartered Accountants’ Society.

Martin Phelan, Esq.

Martin Phelan is a Partner and the Head of William Fry Tax Advisors. One of only five Irish tax professionals to be ranked in the world's top 250 tax professionals, Martin has over 20 years of experience in advising on international tax, and has extensive experience in corporate tax structuring and tax compliance for multinational organizations doing business in Ireland. He is a former Council member and former President of the Irish Taxation Institute and represents the profession on taxation committees with industry, government, and the Irish Revenue. Martin has written extensively on taxation topics, including “Transfer Pricing Ireland” (IBFD) and, as a co-author, “Taxing Financial Transactions” (Irish Taxation Institute). He regularly speaks on international tax topics, both in Ireland and overseas.

Aldo Castoldi, Esq.

Aldo Castoldi is a partner of Studio Tributario e Societario, Deloitte Touche Tohmatsu's Italian member firm and the national leader of the Italian transfer pricing practice since 2008. He has about 20 years of international tax experience, and he has served a wide range of foreign-owned multinationals, as well as Italian concerns. Since the establishment of Deloitte's Italian transfer pricing service line in 1999, Mr. Castoldi has been in charge of all major transfer pricing projects carried out by Deloitte in Italy. He has extensive experience with transfer pricing and international tax issues and has worked for a number of Italian, European, Japanese and U.S. multinationals in a wide range of industries, including the chemical, consumer goods, software, pharmaceutical, media and communications and electronics industries. He has gained significant experience both in performing and coordinating comprehensive transfer pricing studies, tax planning, documentation, and defence projects, and in providing consultancy to multinationals in the context of business model optimization and restructuring projects. He negotiated both Italian first unilateral and first multilateral APA, and supervised the filing of the first application for activating an EU Arbitration Convention to cancel double taxation generated by an Italian tax assessment. Mr. Castoldi has a University Degree in Economics and a Master's Degree in Tax Law. He is a Member, Chartered Accountants (Dottore Commercialista) Association in Italy, and an Italian Chartered Auditor. He is author and co-author of articles published on specialized magazines and newspapers and is a speaker at meetings and events.

Tae-Hyung Kim

Dr. Tae-Hyung Kim is a senior partner and the national leader of the Global Transfer Pricing Group of Deloitte Anjin, Deloitte Touche Tohmatsu's Korea member firm. For more than 13 years, Dr. Kim has represented multinational corporations in various industries in transfer pricing audit defense, Advance Pricing Agreement (APA) negotiations, Mutual Agreement Procedures (MAPs), and planning and documentation studies. Prior to his current position, Dr. Kim headed the national transfer pricing practice at another Big Four firm in Korea, and the Law and Economics Consulting Group in Korea. Before specializing in transfer pricing, Dr. Kim was a research fellow for the Korea Institute for International Economic Policy (KIEP). During his tenure at the KIEP, he advised the Ministry of Finance and Economy, the Ministry of Commerce, Industry, and Energy, and the Ministry of Foreign Affairs in the area of international trade and investment policies. Dr. Kim's recent publications appear in IBFD's International Transfer Pricing Journal , BNA Tax Management's Transfer Pricing Report , and Euromoney's Transfer Pricing Review. His economics publications also appear in the Canadian Journal of Economics and the Review of International Economics. Dr. Kim has a B.A. in economics from Korea University and a Ph.D. in economics from the University of Washington (Seattle). He also participated in the Advanced Management Program at Seoul National University.

Yong Chan Lee

Yong Chan Lee is a partner with the Global Transfer Pricing Group of Deloitte Anjin. Prior to joining Deloitte, Mr. Lee was a core member of the Competent Authority team of the National Tax Service (NTS) in Korea. He primarily handled unilateral and bilateral APA and MAP cases in Competent Authority meetings with the U.S. Internal Revenue Service and the National Tax Agency in Japan. Prior to joining Deloitte, Mr. Lee worked for a number of international tax divisions in the NTS, and dealt principally with transfer pricing issues. He also has over five years of tax audit experience in the International Tax Investigation Division of the Seoul Regional Tax Office (SRTO). He was also a frequent lecturer and speaker for auditors on transfer pricing issues during his tenure at SRTO. Mr. Lee's experience in transfer pricing encompasses a wide range of industries, including manufacturing, distribution, services, and finances for both multinational and domestic corporations. As a result, Mr. Lee has dealt with many of the transfer pricing and international tax issues (for example, tax havens, thin capitalization, beneficial ownership) that face global multinational corporations. Mr. Lee has an M.Sc. in accounting and finance from the London School of Economics and Political Science and an M.B.A. from the University of Birmingham. He is also a U.S. Certified Public Accountant.



Jae Seong Yun

Jae Seong Yun is a manager with the Global Transfer Pricing Group of Deloitte Anjin. He has over five years of experience in transfer pricing. Prior to joining Deloitte, Mr. Yun worked for another Big Four transfer pricing team as a manager. Mr. Yun has been engaged in numerous projects in transfer pricing planning, documentation, APAs, and audit defense for multinational corporations in Korea. Mr. Yun lectured at the NTS's internal training for International Tax Specialists in 2010. Mr. Yun has a Bachelor of Commerce in international business and finance from Australian National University, and is an associate member of CPA Australia.

Sumin Kim

Sumin Kim is a manager with the Global Transfer Pricing Group of Deloitte Anjin. Prior to joining Deloitte's Transfer Pricing Group in Seoul, Ms. Kim worked as an auditor in Deloitte Tax LLP's Chicago office. Ms. Kim's transfer pricing project experience includes documentation, APAs, MAPs, global transfer pricing planning, and audit defense for both multinational and domestic corporations, representing diverse industries.

Table of Contents

Detailed Analysis
Chapter 75 — INDIA
75:I. Introduction
A. In General
B. Provisions Relating to the Competent Authority in India's Income Tax Treaties
1. Comparison to the OECD Model
2. Variations Among India's Income Tax Treaties
75:II. The Competent Authority of India
A. Identification
B. Functions in General
75:III. The Mutual Agreement Procedure for Taxpayer Cases
A. In General
1. Historical Background
2. Powers of Competent Authorities in a MAP
3. Possibility of Taxpayer-Initiated Adjustments
4. Statistics on MAP Cases
B. Types of Cases
1. Allocation Cases
2. Non-Allocation Cases
C. The Procedure
1. Sources of Official Information on the Procedure
2. Taxes and Issues Covered
a. Taxes
b. Issues
3. Who Can Apply?
4. Timing of Requests
a. In General
b. Statute of Limitations and Other Procedural Limitations
(1) In General
(2) Treaty Provisions
(3) Opening Barred Assessment Periods
(4) Keeping Years Open
5. Unilateral Relief
6. The Role of Appeals
7. Pre-Filing and Post-Filing Conferences
8. Information Required
9. Protective Measures
10. Small Case Procedure
11. Simultaneous Appeals Procedure
12. Denial of Requests
a. Basis for Denial
b. Appeal Rights
c. De Minimis Amounts
13. Processing of MAP Cases
a. Stages of Procedure in the Income Tax Department
(1) Examination of the Taxpayer's Claim
(2) Preparation of the Income Tax Department's Position
(3) Negotiation
(4) Decision on the Taxpayer's Claim
b. Withdrawal of MAP Request
c. Effect on Court and Domestic Proceedings
14. Confidentiality in Competent Authority Proceedings
15. Interest on Deficiencies and Refunds
16. Penalties
17. Repatriation of Funds after Reallocation
18. Secondary Adjustment
19. Accelerated Competent Authority Procedure
D. Arbitration
1. Provisions in India's Income Tax Treaties
2. Arbitration Procedures Under India's Bilateral Investment, Promotion, and Protection Agreements
3. Need for Arbitration
E. Protecting the Availability of Foreign Tax Credits
75:IV. Advance Pricing Agreements
A. Introduction
B. Scope of APAs
C. Duration
D. Retroactive Effect
E. Timeframe for the Process
F. Pre-Filing Meeting
G. Preparation and Filing
H. Evaluation of an APA Application
I. Documentation Requirements
1. Pre-Finalization Phase
2. Post-Finalization Phase
J. Case Management Plan
K. Liaison with the Other Competent Authority
L. Compensating Adjustments
M. Withdrawing from the APA Process
N. Monitoring of APA Execution
O. Renewal of an APA
P. Small Business APAs
75:V. Consultation Between Competent Authorities Regarding Treaty Interpretation or Application
75:VI. Exchange of Information
A. In General
1. Exchange of Information Outside of International Agreements
2. Exchange of Information Under International Agreements
a. Income Tax Treaties
b. TIEAs
c. Multilateral Agreements
B. Exchange of Information Under Income Tax Treaties
1. Scope of Treaty Provisions
a. Taxpayers Covered
b. Taxes Covered
c. Nature of Information
2. Types of Exchanges
a. Automatic Exchange of Information
b. Spontaneous Exchange of Information
c. Specific Request for Information
3. Simultaneous Examination Programs
4. Responding to Specific Information Requests Under Tax Treaties
a. Specificity of Request
b. Use of Revenue Powers to Obtain Information
c. Mutuality Clause
5. Restrictions on Use and Disclosure of Exchanged Information
a. Use for Tax Purposes Only
b. General Restrictions on Disclosure
c. Business Secrets
d. Nondisclosure to India's Legislative Body and Nondisclosure to Third Countries
C. Exchange of Information Under Tax Information Exchange Agreements
1. Taxpayers Covered
2. Taxes Covered
3. Nature of Information
4. Types of Exchanges
5. Procedure for Exchanges
6. Exchange of Information Programs
D. Exchange of Information Under FATCA IGA Concluded with the United States
1. Introduction
2. Implementation of the FATCA IGA in India
3. Explanation and Commentary of FATCA IGA
E. Exchange of Information Under the CRS
1. Introduction
2. Implementation of the CRS in India
F. Exchange of Information Under OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters
G. Exchange of Information Under Other International Agreements
75:VII. Assistance in Tax Collection
A. In General
B. Request to a Foreign Country
C. Request from a Foreign Country
Chapter 80 — IRELAND
80:I. Introduction
80:II. The Irish Competent Authority
A. Functions in General
B. Identification
80:III. The Mutual Agreement Procedure for Taxpayer Cases
A. Treaty Provisions on Mutual Agreement
1. OECD Model
a. Transfer Pricing Cases
b. Permanent Establishment Cases
c. Dual Residence Cases
d. Withholding Tax Cases
2. Ireland's Income Tax Treaties
a. In General
b. U.S.-Ireland Treaty
(1) Article 26(1) — Taxation Not in Accordance with the Treaty
(2) Article 26(2) — Domestic Time Limits Ignored
(3) Article 26(5) — Arbitration
B. Background
1. Historical Background
2. Powers of Competent Authorities in a MAP
C. The Process
1. Sources
2. Taxes and Issues Covered
3. Who Can Apply
4. Timing of Requests
a. In General
b. Statute of Limitations and Other Procedural Limitations
5. Unilateral Relief
6. The Role of Appeals
7. Pre-Filing and Post-Filing Conferences
8. Information Required
9. Protective Measures
10. Simultaneous Appeals Procedure
11. Small Case Procedure
12. Denial of Requests
a. Basis for Denial
b. Appeal Rights
13. Processing of MAP Cases
a. Stages of Procedure in Ireland
(1) Examination of the Taxpayer's Claim
(a) Initial Procedural Questions
(b) Unilateral Relief
(c) Consultation Between Competent Authorities
(2) Preparation of Ireland's Position
(a) Option 1: Other Competent Authority Prepares Position Paper
(b) Option 2: Irish Competent Authority Prepares Position Paper
(3) Negotiation
(4) Decision on the Taxpayer's Claim
b. Withdrawal of MAP Request
c. Effect on Domestic Proceedings
14. Confidentiality in Competent Authority Proceedings
a. Confidentiality of Returns and Return Information
b. Communication of Taxpayer Information Between Competent Authorities
c. Nondisclosure by Competent Authorities
15. Interest on Deficiencies and Refunds
16. Penalties
17. Repatriation of Funds After Reallocation
18. Accelerated Competent Authority Procedure
D. Arbitration
1. Income Tax Treaties
a. OECD Model
b. U.S.-Ireland Treaty
2. Other Dispute Resolution Mechanisms in Ireland
E. Protecting the Availability of Foreign Tax Credits
80:IV. Advance Pricing Agreements
A. Background
B. Ireland's APA Program
1. Overview
2. Purpose of Ireland's APA Program
3. The APA Process
a. Pre-Filing
b. Formal APA Application
c. Evaluation of an APA Application
d. Formal Agreement
e. Annual Reporting
4. Cancellation or Revocation of an APA
5. Revising an APA
6. Confidentiality in Competent Authority Proceedings
80:V. Consultation Between Competent Authorities Regarding Treaty Interpretation or Application
A. Scope of Consultation Provisions
1. OECD Model
a. Interpretation and Application of the Treaty
b. Double Taxation in Cases Not Provided for in the Treaty
2. U.S.-Ireland Treaty
B. Use of Consultation Procedure
C. Legal Effect of Consultations
80:VI. Exchange of Information
A. In General
1. Exchange of Information Outside of International Agreements
2. Exchange of Information Under International Agreements
B. Exchange of Information Under Income Tax Treaties
1. Scope of Treaty Provisions
a. Taxpayers Covered
b. Taxes Covered
c. Nature of Information
2. Types of Exchanges
a. Specific Request for Information
b. Automatic Exchange of Information
c. Spontaneous Exchange of Information
d. Industry-Wide and Issue-Specific Exchange of Information
3. Simultaneous Examination Programs
a. General Purpose
b. Specific Objective
c. Procedures
d. Disclosure of Information
4. Responding to Specific Information Requests Under Tax Treaties
a. Specificity of Request
b. Use of Revenue Powers to Obtain Information
c. Reciprocity
5. Business Secrets
6. Restrictions on the Use and Disclosure of Exchanged Information
a. Use for Tax Purposes Only
b. Restrictions on Disclosure
c. Disclosure to the Irish Government
d. Nondisclosure to Third Countries
C. Exchange of Information Under Tax Information Exchange Agreements
1. Taxes Covered
2. Types of Exchanges
3. Agreement Provisions
4. Statutory Framework
5. Limitations in the Agreements
D. Exchange of Information Under Other International Agreements
1. EU Mutual Assistance Directive
2. EU Savings Directive
3. Foreign Account Tax Compliance Act
4. Multilateral Competent Authority Agreement on Exchange of Financial Account Data
E. Exchange of Information Under FATCA IGA Concluded with the United States
1. Introduction
2. Implementation of the FATCA IGA in Ireland
3. Explanation and Commentary of the FATCA IGA
F. Exchange of Information Under the CRS
1. Introduction
2. Implementation of the CRS in Ireland
4. Explanation and Commentary of the CRS
80:VII. Assistance in Tax Collection
Chapter 85 — ITALY
85:I. Introduction
85:II. Italian Competent Authority
85:III. Mutual Agreement Procedure in Taxpayer Cases
A. Treaty Provisions on Mutual Agreement
1. The OECD Model
2. Italian Tax Treaties
3. The EU Arbitration Convention
B. Background
C. The Process
1. Scope of a MAP
2. Who May Apply?
3. Presentation of the Case
4. Timing of the Request
5. Denial of Requests
6. Relation to Tax Court Procedure
7. Processing of MAP Cases
8. Content and Application of the Agreement
D. Arbitration
E. Other Additional Instruments to Avoid a Double Taxation — Correlative Adjustments
85:IV. Advance Pricing Agreements
Introductory Material
A. Organization
B. Scope
C. Duration
D. The Ruling Request
E. The Ruling Process
85:V. Exchange of Information
85:VI. Consultation Between Competent Authorities Regarding Treaty Interpretation or Application
A. In General
B. Scope of Consultation Provisions
C. Use of Consultation Procedure
D. Legal Effect of Consultations
85:VII. Assistance in Tax Collection
A. In General
B. Basis for Assistance in Tax Collection
1. Income Tax Treaties
2. Bilateral Conventions for Mutual Assistance in the Recovery of Tax Claims
3. Council of Europe/OECD Convention on Mutual Administrative Assistance in Tax Matters
4. EU Legislation
C. Implementation of Assistance in Tax Collection
1. CoE/OECD Convention
2. EU Regulations
Chapter 95 — KOREA
95:I. Introduction
95:II. The Competent Authority of Korea
A. Identification
B. Functions in General
C. Organizational Structure
95:III. The Mutual Agreement Procedure for Taxpayer Cases (MAP)
A. Treaty Provisions on Mutual Agreement
1. OECD Model Tax Convention
2. Korean Income Tax Treaties
B. Background
1. Historical Background
2. Powers of the Competent Authority in a MAP
3. Types of Cases
a. Allocation Cases
b. Non-Allocation Cases
4. Program Evaluation
C. Sources
D. Taxes Covered
E. Who Can Apply
F. Timing of Requests
1. In General
2. Statute of Limitations and Other Procedural Limitations
G. Appeals
H. Pre- and Post-Filing Conferences
I. Information Required
J. Denial of Requests
K. Processing of MAP Cases
1. MAP Procedure
a. Examination of the Taxpayer's Claim
b. Commencement Date of the MAP
c. Negotiation
d. Decision on the Taxpayer's Claims
2. Effect on Court Proceedings
L. Interest on Deficiencies and Refunds
M. Penalties
N. Repatriation of Funds After Reallocation
O. Extension of Application of MAP Agreement
P. Arbitration
95:IV. Advance Pricing Agreements
A. Introduction
B. APA Team
C. Timeframe
D. Types of APAs
E. Term
F. Rollback
G. Pre-Filing Conference
H. Preparation and Application
I. Documentation Requirements
J. Evaluation of APA Application
K. Suspension of MAP
L. Conclusion of APA
M. Post-Approval Procedure
N. Withdrawal of APA Application
O. Cancellation or Withdrawal of APA
95:V. Consultation Between Competent Authorities Regarding Treaty Interpretation or Application
95:VI. Exchange of Information
A. Tax Treaty Provisions for Exchange of Information
B. Exchange of Information Under the Tax Treaties and LCITA
C. Exchange of Information Under FATCA IGA Concluded with the United States
1. Introduction
2. Implementation of the FATCA IGA in Korea
D. Exchange of Information Under the CRS
1. Introduction
2. Implementation of the CRS in Korea
95:VII. Assistance in Tax Collection

Working Papers

Table of Worksheets
Worksheet 1 Form 34F
Worksheet 2 Notice on Competent Authority Procedures
Worksheet 3 Income Tax Act, 1961, and the Income Tax Rules, 1962: Rule 44G, Rule 44H, §220(3) of the Act
Worksheet 4 C&AG Report: Report No. 13 — Systems Appraisals: §§3.9.4, 3.9.6–3.9.11, 3.9.12, 3.9.13, and 3.9.14
Worksheet 5 India-U.S. Income Tax Treaty: Articles 1, 25, 27, and 28
Worksheet 6 Memorandum of Understanding Between India and the United States
Worksheet 7 Contact Information for Indian Competent Authority Officials
Worksheet 8 Form 3CEC
Worksheet 9 Form 3CED
Worksheet 10 Form 3CEDA
Worksheet 11 Form 3CEE
Worksheet 12 Form 3CEF
Worksheet 13 APA Organizational Structure
Worksheet 14 Variations Among India's Income Tax Treaties
Worksheet 21 Irish Revenue Guidance
Worksheet 22 OECD Materials on Ireland
Worksheet 23 Agreement Concerning the Treatment of Common Contractual Funds Between the Competent Authorities of Ireland and the United States, Feb. 9, 2006
Worksheet 31 Administrative Materials and Additional Resources
Worksheet 51 Form 1-3. Report of Transfer Pricing Method
Worksheet 52 Form 4. Application for Commencement of Mutual Agreement Procedures
Worksheet 53 Form 6-2. Confirmation on the Repatriation of the Transferred Income Amount
Worksheet 54 Form 12. Confirmation on the Application of the Special Treatment on Statute of Limitation
Worksheet 55 Form 13. Applicant's Opinion Regarding the Proceeding Period of the Mutual Agreement Procedures
Worksheet 56 Form 15. Application for Special Treatment on Suspension of Tax Collection and Others
Worksheet 57 Form 16(1). Notice on the Closing of the Mutual Agreement Procedures (I) [Use for Disposition in Korea]
Worksheet 58 Form 16(2). Notice on the Closing of the Mutual Agreement Procedures (II) [Use for Foreign Disposition]
Worksheet 59 Form 16-2. Application for Extension of Mutual Agreement Procedures Result
Worksheet 60 Form 19. Request for Entrustment of Tax Collection between the States
Worksheet 61 Form 20. Notification for Provision of Information
Worksheet 62 Form 3. Request for Information on Financial Transaction