During the "Tax Certainty Day" held in Paris on September 16th, OECD revealed the global statistics for the Mutual Agreement Procedure. In particular, those relating to transfer prices has increased, recording a growth of almost 20% compared to 2017. In Italy, one of the countries with the highest number of MAPs in progress, 256 new cases were activated in 2018. Times for the conclusion of the procedure are around 2 and a half years in our country.
During the “Tax Certainty Day” on September 16th OECD released the statistics relating to the dissemination and outcomes of Mutual Agreement Procedure (MAP). The statistics, covering 89 jurisdictions, provide a global overview of almost every MAP case worldwide.
OECD data show how new cases keep increasing, with those relating to transfer pricing that mark almost + 20% compared to 2017, and those relating to other cases in which the increase was over 10%. The majority of tax administrations are closing more cases than before and the country data show a decrease of inventory in about half of the reporting jurisdictions and an increase in the other half. However, the aggregated global inventory continues to rise, especially because for transfer pricing cases the number of cases closed increases at a slower pace than the number of cases started.
With reference to the duration of the procedure, on average transfer pricing cases continue to take more time with average times being as follows in 2018: approximately 33 months (less than 3 years) for transfer pricing cases (30 months in 2017) and 14 months for other cases (17 months in 2017).
On aggregate basis, cases started during 2018 amounted to 2,385 and cases solved, including those received starting from 2016, 1,473 for a total of 3,250. With reference to the cases received prior to 2016 (quantified using the methods of each country and subject to double counting) these amounted to 3,355, of which 1,231 are the cases closed.
With reference to outcomes, during 2018 more than 80% of MAPs concluded in 2018 resolved the issue for transfer pricing cases and more than 75% other cases.
Referring to Italy, in 2018, 256 new cases were started. The country ranks sixth out of 89 countries by number of MAP procedures. If 256 were the new cases started in the year, 101 are those closed. The inventory at the end of 2018 counts 742 cases, against the 587 existing at the beginning of the year.
The average time of a case in the country is 28.6 months. Longer period compared to the performance of other similar European countries such as Germany and France, which stood at around 2 years each (24 and 22 months respectively). The differential increases in an unfavourable way with the United Kingdom (13.4 months) and the Netherlands (12.3 months) but is positive if compared with the performance of non-EU countries such as the United States and China where the procedure on average lasts longer than Italy (32.3 and 31 months respectively).
Lastly, with specific reference to the transfer pricing cases started in Italy, those started in 2018 amounted to 196, against a number of closed cases equal to 90. The inventory at the end of the year counts 501 cases against the 395 registered at the beginning of the year.
Given the general increase of new MAP cases, the pursuit of a taxation characterized by greater certainty and stability represents a fundamental goal to promote the further spread of this procedure over the years. In general, a context with a greater tax certainty would have a positive impact on the company's core business, giving a potential boost to growth, jobs and investments.
Transfer Pricing Manager - Milan