Tax Dispute Resolution: A New Chapter Emerges: Tax Administration Without Borders

Tax dispute resolution:
a new chapter emerges

Tax administration
without borders
Contents
Introduction 04
The road to Alternative Dispute Resolution 06
ADR processes 08
Factors to consider 22
Conclusion 25
ADR processes in country jurisdictions 26

Australia 27
Belgium 29
Brazil 30
Canada 31
China 32
European Union 33
France 34
Germany 35
Hong Kong 37
India 38
Italy 39
Japan 40
South Korea 41
Mexico 42
The Netherlands 43
Russia 45
Singapore 46
South Africa 48
Turkey 49
United Kingdom 50
United States 52
4
Introduction
Tax authorities are adapting their enforcement strategies, focus and policies in response to the
changing dynamics of business and the need to make sure that all due taxes are paid. They are
developing better tools, processes and capabilities to help ensure that their limited resources
are being applied to the right issues and taxpayers. They are also sharing more information
with their foreign counterparts, growing more sophisticated, sharpening their enforcement
focus and developing new legislation to help them collect every dollar due to them. The result
has been more frequent and complex disputes between taxpayers and taxing authorities —
! "!
more sophisticated approach to taxation.
As tax authorities sharpen their focus on taxpayers or the public at large, if it can Broadly speaking, ADR is a series of
compliance and enforcement, taxpayers be avoided. While it is acknowledged approaches that opens up a channel for
must also adjust their strategy. Facing that there are circumstances that taxpayers to interact with administrations,
an onslaught of examinations being warrant litigation, there is also an and resolve issues or disputes, without
conducted simultaneously in jurisdictions acknowledgement that many cases that resorting to litigation. It also includes
around the world, companies needed to be are initially on track for litigation are approaches to work with the tax
positioned to proactively manage potential

administrator to obtain certainty on a

can be derived if the appropriate tools, potential issue before the tax return is
processes in the tax planning stage to practices and procedures are in place
avoid subsequent controversy, evaluating and used. As a result, ADR processes are disputes to be resolved earlier, or avoided
tax positions for possible risk areas, showing high rates of growth around the altogether, thereby giving both parties
establishing protocols for responding world. greater certainty and the ability to channel
to examination requests, developing scarce resources into more productive
The result of our analysis is a report in
activities
which we look at the key features of ADR
jurisdiction, and building relationships
and assess the factors for consideration ADR should not, however, be considered
with tax authorities. As we set out in our
for the tax executive who is responsible for as a replacement for litigation in all
2009 publication “Tax administration
the strategy and implementation of a plan cases. When the law is unclear, or where
without borders1”, one key to the success
to address global tax controversy and risk. the ability to resolve an issue after
of proactive management of global tax
We also provide summary information on administrative efforts fail, the legal route
controversy and risk is the knowledge
the available ADR processes in more than will be entirely appropriate. By providing
of the existence of alternative dispute
20 countries. the opportunity to resolve issues at an
resolution tools, as well as the factors to
earlier stage through active engagement,
be considered in their use. Although often unavoidable, tax
ADR offers the prospect of a less
litigation is nonetheless usually a
In the summer of 2010 we set out to confrontational and costly approach for
worst-case scenario for taxpayers and
understand the current state and recent both taxpayers and tax administrations.
tax administrations, a costly and time-
trends in Alternative Dispute Resolution
consuming process that can often be
(ADR), an increasingly popular approach
fraught with uncertainty and mistrust.
to resolving tax disputes before they
With companies and government
reach litigation. Taxpayers are seeking,
increasingly seeking to reduce costs
and expecting, that tools to resolve or
and streamline processes, tax litigation
avoid controversy be made available.
holds less and less appeal; there is a
Fortunately, tax administrations are also
growing recognition on both sides that an
recognizing that costly litigation is not
alternative approach to resolving disputes
in the best interest of the government,
is needed.
1
http://www.ey.com/taxadministrationwithoutborders
Tax dispute resolution: a new chapter emerges

5
“ In today’s global environment and the context of what tax

administration is today, taxpayers and the government have
less appetite for litigation of issues because the costs and
timeliness to come to resolution, and because of the complexity
of tax law. ADR is a way for governments to open up a channel
for taxpayers to interact with them, to resolve an issue and a
dispute that may be done in a way that is quicker, less costly
#
Frank Ng, former Commissioner of the IRS Large and Mid-size
Business division and Ernst & Young Tax Controversy
and Risk Management Services partner

6
The road to Alternative

Dispute Resolution
Although the ADR concept is still evolving worldwide, the past few years

!
"

#

$
%&
“I think that one of the

by-products of countries
needing more revenues to
make up the gap in their

through stimulus is that we
will see a tougher line from
administrations. The other
side of it, though, is that they
will give those companies
that they trust a lighter audit
touch, and will be redeploy
the experienced resources
that they would otherwise
use on those companies onto

as being much higher risk.”
Bob Brown
Global Controversy Leader
2008-2010, Ernst & Young
7
“ I do think there is a shared view on the parts of companies and tax

are opportunities to achieve greater certainty, on both sides at a
much lower cost and with much greater speed, provided that there
is a better understanding of the key commercial factors that are
driving decisions being made by the multinationals.”1
Alan McLean, Executive Vice President,
Tax and Corporate Structure, Shell
While these ADR tools and approaches have developed independently of each
other, there are numerous trends at a global level that serve as a catalyst for tax

$
been an important factor. An increased expectation on the part of large businesses,

for similarly situated taxpayers is another factor.
Achieving certainty and resolving or avoiding disputes can be approached in a
% % $
numerous taxpayers, through the use of broad guidance, for example. We have
addressed both. For purposes of our survey, we also included Advance Pricing
%

this tool to resolve potential transfer pricing disputes, and the added dimension of
the mutual agreement processes with the competent authorities where tax treaties
are in effect.
Increased taxpayer disclosure and information reporting

is one tool that tax administrations are using to maximize

“resource to risk”. The recent proposal in the United States
& ' **+<%'=
to disclose uncertain tax positions on the tax return, will

tools for taxpayers to achieve certainty.
1
Ernst & Young
, June 2010
http://www.ey.com/TPC

8
ADR processes
$
'

()
)

9
"*'+ $

Country name ? % ?% Advance pricing agreements

Australia 9 9 9
Belgium 9 9 9
Brazil 9
Canada 9 9 9
China 9 9 9
European Union 9
France 9 9
Germany 9 9 9
Hong Kong 9 9
India 9 9
Italy 9 9 9
Japan 9
Mexico 9 9 9
Netherlands 9 9 9
Russia 9
South Africa 9 9
South Korea 9 9
Singapore 9 9
Turkey 9 9
United Kingdom 9 9 9
United States 9 9 9
Advance Pricing Agreements

Advance pricing agreements (APAs) allow taxpayers and tax authorities to agree
on an appropriate transfer pricing methodology in advance of a return being
$

is tax treaty in place between the relevant authorities. As such, they provide
assurance to taxpayers that, as long as the agreement is complied with, and that
there are no changes in critical assumptions, there will be no further dispute with
the tax authorities. By using APAs, companies can also reduce costs, minimize
documentation requirements and mitigate the risk of penalties or double taxation.
Many countries will allow for a multiyear agreement, either formally or through
practical application.
A recent Ernst & Young survey1 found most large economies now have such
arrangements in place and suggested that more jurisdictions are committing to
the introduction of APA programs. India, for example, indicated that it is currently
investigating such programs. The survey also suggested that jurisdictions with
?
%

their competent authority to deal with an expected increase in cross-border transfer
pricing disputes, and the need for tax treaty administration and interpretation.
1
For more information on Transfer Pricing regulations around the
world, please see Ernst & Young’s Transfer Pricing Survey and
Transfer Pricing Reference Guide at www.ey.com/transferpricing

10
“ Everyone in government

O Rulings or guidance that affects recognizes that the resources
multiple taxpayers (such as Industry applied to audit are costly, time-
? % Issue Resolutions in the US): These
to resolve issues and disputes with consuming and burdensome.
allow groups of companies, such as
industry bodies or associations, to If they could begin to shift those
return. Although approaches vary consult with tax administrations on resources from a post-compliance
between countries, the key concept is issues that affect multiple companies.
%
%
Following the consultation period, the

give taxpayers certainty that, once an administration may release updated
issue has been resolved, the position
but also relationships and
guidance that rules on how the tax
will not be challenged by the tax position should be treated. goodwill with your taxpayer base,
administration during the audit process. which is the foundation of tax
Taxpayers in the United States, for
? %
administration.”
example, can, request a private letter
broken down into three main categories: ruling, which will determine prior to Frank Ng, former Commissioner of
the IRS Large and Mid-size
O $ %
&? % or the tax effects of a particular Business division and
in the US): These allow individual transaction. Factually intensive Ernst & Young Tax Controversy and
companies to consult with authorities and post-transactional issues can Risk Management Services partner.

issue or transaction. If agreement means of the Pre-Filing Agreement
Program (PFA), a process similar to relationship” with Horizontal
is reached, the company obtains Monitoring. This enables taxpayers to
certainty that this transaction will not the traditional audit process, albeit
more collaborative and transparent. resolve issues between the company
be challenged. and the Dutch Tax Administration
Issues that affect multiple taxpayers
can be resolved in the US by means $
@L
? of the Industry Issue Resolution characterized as a form of voluntary
strategy if you have strong facts (IIR) Program where the IRS issues disclosure: the taxpayer promises
and you have a similar business published guidance based on feedback actively to notify the tax authorities
from taxpayers, representatives and of any issues with a possible or
model throughout your operations. !
associations for the IIR Program.
We actually have a number of facts and circumstances regarding
foundation stones at the center O “Enhanced relationship” these issues without hesitation
of our tax risk management arrangements that cover the entire or reservation. In return for full
tax return (such as Horizontal disclosure of relevant issues, the
strategy. At its heart, we have
Monitoring in the Netherlands or tax authority undertakes to provide
APAs with the major countries in the Compliance Assurance Process

which we do business. To build [CAP] in the US): There are currently positions, taking into account real
on this, whenever we have the relatively few examples of enhanced commercial deadlines when doing so.
opportunity, we memorialize a relationship arrangements and
most are pilot programs that have Our survey suggests that Horizontal
tax audit into an APA, giving us Monitoring is generally perceived
been adopted by a small number
of multinational companies. These as being an effective and successful
statement precision. When we arrangements — one of the areas we process among the Dutch business
couple this with transparency, community, although such processes
global consistency in our approach interest — require transparency typically require some fairly sizeable
and cooperation on the behalf of changes to occur within the company
to tax risk and strong internal if they are to be successful. We also
taxpayers throughout the year, and
controls, we have a strategy that understand that Horizontal Monitoring-
a highly collaborative approach
delivers more risk management between the taxpayer and the tax type arrangements are likely to be
certainty.” administrator. broadened out over coming years, in
the Netherlands, and indeed, in other
Tim McDonald, Vice President, The Netherlands is one country that parts of the world where the “enhanced
Finance Accounting, Global Taxes, has been at the forefront of the relationship” provided for by the OECD
Procter & Gamble development of the “enhanced Tax Intermediaries Study is adopted.

11
-)
% . Since 2005, the Large and Mid-Size Initially launched with 17 participating
Business (LMSB) Division of the IRS corporate taxpayers, the CAP program
In the United States, taxpayers can
(recently restructured into the “Large has grown rapidly. In 2010,
request a private letter ruling, which will
Business and International” unit) 130 taxpayers participated. The

has also run a pilot program, called rapid growth of the scheme, along
for tax purposes or the tax effects of
Compliance Assurance Process (CAP), with the continuing participation of
a particular transaction. The letter
which enables taxpayers and the IRS taxpayers, suggests that the process
interprets the tax laws and applies them
to resolve issues before tax returns is working well. The CAP program is
V
% generally perceived as yielding fair
$ % auditing. Unlike PFAs, which relate to a

very factually intensive and post- Z? \
means of resolving issues as well as
transactional, which might otherwise be co-operation between the Service and real-time certainty. In fact, the IRS, in
addressed during the audit process, can participating taxpayers through an materials accompanying the release of

“enhanced relationship”. ^_$? ^ +<*<
of the Pre-Filing Agreement Program announced that the CAP program is to
Throughout the tax year, taxpayers
(PFA). In this case, the issue would be not only be expanded, but is also to be
that have been invited to take part in
reviewed in much the same way as it made permanent.
the pilot are expected to engage in full
would during the audit process, but it is
disclosure of information concerning Taxpayers who choose to participate
carried out in a far more collaborative
their completed business transactions in the scheme should be prepared,
and transparent way between the
and their proposed return treatment

taxpayer and tax authorities.
of all material issues. Taxpayers work resources to the scheme, particularly
Issues that affect multiple taxpayers together with an IRS Account Co- L
can be resolved in the US by means ordinator to identify and resolve issues. taxpayer must work simultaneously on
of the Industry Issue Resolution (IIR) As issues are resolved, the Account Co- audits of prior years, real-time audits
Program. This is intended to resolve ordinator will document the resolution of the current year and tax return
frequently disputed or burdensome in an Issue Resolution Agreement, which preparation.
the taxpayer will use to determine the
number of business taxpayers through tax return treatment of each issue.
the issuance of published guidance.
If all outstanding issues can be resolved
The IRS solicits suggestions for issues

from taxpayers, representatives and

associations for the IIR Program. For
consistent with those resolutions, the
each issue selected, a resolution team
taxpayer gains assurance that no post-
of IRS representatives, Chief Counsel
\ L
and Treasury personnel is assembled
all issues cannot be resolved, either by
to gather and analyze relevant
collaboration between the Account Co-
information. Based on this process, they
ordinator and taxpayer, or other existing
then develop and recommend formal
IRS resolution processes, the remaining
guidance.
items will then revert to the more
traditional examination process.

12
Timeliness is also an issue. It may be

The new tax risk and to disclose all facts and
enhanced those with an international dimension,

circumstances regarding these issues
without hesitation or reservation.
relationship deadline. Moreover, the broader success
of CAP will depend on a shift in both
“Horizontal monitoring is a process
which needs continuous efforts from
taxpayer and government behavior
“An enhanced relationship offers both parties, since it has to do with
and, in some instances, there is some
building and maintaining a relationship

$ way to go before that transition is
built on mutual trust, understanding
who behave transparently complete. Entrenched ways of working
and transparency,” said Theo Poolen,
can expect greater certainty mean that, sometimes, taxpayers or the
a member of the management
and an early resolution of tax IRS will resort back to the traditional
board of the Dutch Tax and Customs
audit process as opposed to working in
issues with less extensive audits Administration in a recent interview
a collaborative and transparent way to
and lower compliance costs. with Ernst & Young.
reach the right answer.
And an enhanced relationship In return for full disclosure of relevant
between revenue bodies and Although CAP remains a pilot program,
issues, the tax authority undertakes
tax intermediaries should it is expected that it will soon be

formalized by the IRS, particularly in
reporting positions, taking into account
light of the early 2010 proposals on
And it is also not just a way of real commercial deadlines when doing
Uncertain Tax Positions, which suggest
maintaining compliance and L
a broader shift towards transparency
low-risk behaviour — it is about returns within an agreed timeframe
and disclosure between taxpayers and
changing behaviour by ensuring and the tax authorities impose tax
the IRS.
assessments as soon as possible after
%
" ! / receipt of the return. This process
to business occupying the low- means that, rather than looking
‘Horizontal Monitoring’
risk space. CFOs around the retrospectively at past returns and
world told us that what matters According to the traditional taxpayer-tax
transactions, both taxpayer and tax
to them above all is certainty authority relationship, a company would
administration are focused on the

— no surprises from their tax present and the future.
would review it retrospectively. But this
departments, by disclosing gives limited scope for engagement The Horizontal Monitoring regime is
and dialog, and means that authorities designed to provide companies with a
real time and by revenue bodies are essentially looking in the rear- higher level of compliance certainty.
responding proportionately. view mirror. An enhanced relationship The most visible aspect of this is a
And tax administrations can’t would enable tax administrations to reduction in the number and rigor of
leave businesses engaged in an gain a more up-to-date view of current tax audits, since all relevant facts and
open relationship to fend for taxpayer behavior. In theory, this circumstances are discussed in advance.
means that they would be able to issue “Some of the advantages mentioned
themselves in the tax jungle.
guidance either internally or externally were the ability to work on a real-time
This too is a matter of trust.”
% basis, with no backlog of issues,” says
Mr. Poolen. “Reduction of uncertainties
Dave Hartnett, Permanent Secretary In 2005, the Dutch Tax Administration
was another theme, along with
for Tax, HMRC, speaking at the introduced Horizontal Monitoring, which
expediency of dealing with issues. My
Institute of Chartered Accountants in enables taxpayers to resolve issues
colleagues from the tax administration
England and Wales Hardman Lecture, @
listed the same advantages and noted
12 November 2009 relationship” between the company and
an increased transparency and mutual
the tax administration. The process can
trust between us and the companies.”
be characterized as a form of voluntary
disclosure; the taxpayer promises
actively to notify the tax authorities of

13
Taxpayers considering participation

need buy-in from the most senior levels “ I would say that in a couple of the major jurisdictions in which we do
of the organization, believes Mr. Poolen. business we have entered into these enhanced relationships, which
“We acknowledge the importance of

L
commitment at the highest level for
this new approach,” he says. “Before
L !

entering this program, board-to-board

meetings were called. And during There are opportunities to achieve greater certainty, on both sides at
these meetings the board of the tax a much lower cost and with much greater speed, provided that there is
administration asked for commitment a better understanding of the key commercial factors that are driving
on behalf of the company’s board for decisions being made by the multinationals.”
this new way of co-operation.”
Alan McLean, Executive Vice President, Tax and Corporate Structure, Shell
Horizontal Monitoring is generally
perceived as being an effective
and successful process among the
Dutch business community. One
important reason for this is that is
has been created using frequent
open collaboration among all relevant
stakeholders. “The design of horizontal
monitoring is based upon inputs that we
received from the business community,”
he explained. “We really listened to
criticism both from our staff and our
external stakeholders and tried to use
this to develop a new way of working.”
But as Mr. Poolen explained, the
transition has demanded a change in
culture and mindset on behalf of both
taxpayer and administration. “We have “ We call this new approach the ‘enhanced relationship’. Its starting
found that this new way of working
point is a mutual understanding of each party’s needs and aspirations,
sometimes demands a change in culture
and behavior,” he says. “The skills
the development of the tools and techniques most appropriate for
required for working in this manner achieving these, and a path to implementing what needs to be done.
include both tax expertise as well as Fundamental, to the long-term success of the enhanced relationship is the
communication and co-operation skills establishment and maintenance of trust amongst all the parties.”
— what we call the soft skills. And our
OECD Study into the Role of Tax Intermediaries, 20082
attitude needs to be about solving
problems.”
2
http://www.oecd.org/dataoecd/28/34/39882938.pdf

14
Case study: TNT

`{ |} L
in 2005, the logistics company TNT was one of 20 it reduces the amount of tax we owe, it hits the P&L
companies listed on the Dutch stock exchange that agreed immediately. We need less provision for uncertain tax
to participate on a trial basis. For Bart Kuper, Group Tax positions than we had before.”
Director at the company, board-level commitment was
More broadly, the transparency and sharing of information
essential before committing to the pilot. The participation

of TNT in the scheme required investment in personnel
as a whole, believes Mr. Kuper. Because TNT discloses
to clear a backlog of open issues and ensure that the tax
details of how it has structured different transactions, the
function could manage the process on an annual basis. The
tax authority can better and more quickly understand the
board agreed to this and, in return, Mr. Kuper committed
commercial aspects and work more effectively with other
to providing a regular update to board members on the
companies that have similar issues. This helps to create
progress of participation in the scheme, which over time

was widened in scope to include issues such as customs
service taxpayers in a fair and consistent way.
declarations.
Five years of participation in the Horizontal Monitoring
Clearing the backlog of open issues was extremely
scheme have given Mr. Kuper, and TNT, rare insight into
%
!
@`
process. Companies planning to enter a similar
might have had three years’ worth of open issues with the
program need buy-in from the most senior levels of the
tax authority, nowadays we are agreeing within the next
organization, believes Mr. Kuper. “Clearly you need internal

commitment before you even start this,” he says. “If there
the entire Dutch group,” says Mr. Kuper.
is no internal commitment, it can be a way to get yourself
The scheme has given TNT greater clarity over its tax in trouble. But if you do have the internal commitment
position and even facilitated the corporate planning lined up before you start — and make sure you maintain
process. “Each year, if we plan our request to the authority that commitment and keep your board up to date with how
properly, we generally have an answer before we close things are going, then yes, I can really recommend going
the books,” says Mr. Kuper. “That’s an outstanding result into this kind of process.”
01

low-risk matters. In the case of major transactions or tax
positions that have a level of uncertainty, taxpayers engage in
The announcement by Michael D’Ascenzo, the Australian
workshops and discussions with the ATO throughout the year,
Commissioner of Taxation, that his administration would in
which allows both parties to assess tax risks jointly.
future look at a company’s uncertain tax positions as part of
its investigations, is a further sign of an international shift Although still in its early stages, the process has brought
towards greater expectations of disclosure and transparency. Z

$ ~&$~= their compliance from a position of greater certainty and
% Z have little or no exposure to penalties and interest, while
(ACA), which it launched in 2008. And although this scheme $~
is relatively small, the statement on uncertain tax positions administration. “I have seen some of those companies get
suggests that it is likely to grow considerably in the years
# } V|
ahead. a recent interview with Ernst & Young. “For us, we have been
able to resolve a range of litigation issues, we have narrowed
The ACA process involves the taxpayer and ATO engaging in
the range of issues that we might get forward with and we
early dialog on tax risks. Taxpayers are expected to be open
have provided streamlined processes for resolving those
and disclose all potential issues so that risks can be mitigated.
issues. It’s been a win-win situation for everybody.”
If a company has sound risk management processes and
provides full and true disclosure, the ATO will sign off on

15
Although the ACA is currently available an opportunity for taxpayers to discuss In addition, the Chinese authorities
only to the top 50 publically listed
are open to taxpayers’ request for
companies on the Australian Stock by means of formal processes that discussions to clarify alternative tax
Exchange, progress so far suggests are documented in law or, in certain treatments on certain issues in advance.
that there is an appetite to broaden instances, on a case-by-case basis. But companies should be aware that
the scheme to other businesses. “If this process does not usually result in
$ %
we are able to reduce the risk with the binding rulings. The views received from
processes: advanced pricing
taxpayer upfront, we provide them the tax authorities by means of this
agreements, which are generally valid
with practical certainty, they get on advance negotiation process therefore

with their business, [it’s] good for the carry a level of uncertainty and may be
and Tax Collection on Deemed Basis
economy and we don’t have disputes disputed by higher-level tax authorities
(TCDB), which the tax authorities
after the event,” says Mr. D’Ascenzo. or in other locations.
generally apply to small-scale taxpayers,
@^ V% V

better way of doing things.”
establishments of foreign companies in
1 China. Common TCDB options include

In China, tax laws and regulations
rate and deemed taxable income.
generally only provide general
principles, while their implementation
is typically subject to local practice and
interpretation. Nevertheless, there is
“The ACA is an opportunity,

if you are willing to put in
the work, to gain favor with
the Revenue Authority and
drive down your tax risk,
but the downside for all this
conciliatorily behaviour is
that’s it’s very resource-heavy.
You are constantly having
to enter into dialog with the
Revenue Authority, explaining
everything to them and
asking them to rule on every
transaction that you go into.
There is going to be a massive
cultural shift in the market if
this is to work.”
Howard Adams,
Tax controversy partner,
Ernst & Young, Sydney

16

Resolution (AIR) Process in the US,
for example, enables an issue to be
Not every company will want to or accelerated through the process to
be able to resolve disputes prior the Appeals function with authority

to resolve issues based on a hazards
administration embraces the approach. settlement. Taxpayers can also
% make a request to use the Fast Track
Settlement program, which uses
overall objective is similar to the pre- the mediation skills and delegated
L settlement authority of Appeals to
arises during the examination process, resolve issues while still under the
taxpayers can enter into a constructive jurisdiction of the examination team
dialogue with the tax authorities in an and can save almost two years in the
attempt to reach agreement without process.
reverting directly to a legal process.
In some jurisdictions taxpayers are
Quite often, disputes are the allowed to appeal against disputed
result of differences of opinion or decisions. In China, for example, a
professional judgment related to taxpayer that disagrees with an act
factual determinations. Valuation or or decision of a tax authority has
allocation issues are examples where a right to seek an administrative
there is much room for agreement review. Although this process is not
within a range of acceptable answers. performed by an independent third
Sometimes the dispute is the result party and can require considerable
of different interpretation of the legal procedures and paperwork to
principles applied. Although approaches complete, it is nevertheless regarded

% as a less time-consuming process of
processes can essentially be broken dispute resolution compared with
down into two main categories: litigation. In other jurisdictions, there
O Where there is a factual dispute are processes in place that serve as
a next step if attempts to negotiate a
processes that involve a direct settlement between the two parties
dialogue between taxpayer and tax have failed.
authorities, can often serve to resolve
a dispute through negotiations to
arrive at a resolution that both
parties can agree as fair. This can be
accomplished through discussion with
the examination team, and is most

Where a resolution can only be based
on “hazards of litigation”, processes
can be used to bring the dispute to
the appropriate authority within the
tax administration, or delegate the
authority to the examination team

delegation. The Accelerated Issue

17
Dave Hartnett, the Permanent Secretary for Tax

has said that “HMRC should be litigating less,”
which suggests that the pendulum could be
swinging back in the other direction.
3
In a late 2009 interview with Ernst & Young ,
} { !
in favor of having a review process prior to
embarking on litigation. “I’m very attracted
to the approach I’ve seen in the US and one
or two other countries of having an internal,
independent review before the button is really
pressed for litigation to start,” he said. “I think
part of my role at HMRC is sometimes to say
to all of our people: ‘This issue is not really for
litigation; we can’t do it.’”
Although the Litigation Settlement Strategy
(LSS) model will remain in place, there is likely
to be greater emphasis on the settlement
aspects of the strategy. HMRC has said that it
will introduce Collaborative Dispute Resolution
(CDR), which will encourage inspectors, clients
and advisors to settle apparently intractable
disputes. This may include techniques such
as the use of third-party mediators, joint
instructions to Counsel and training of HMRC
in negotiation and settlement skills. HMRC
will operate a number of pilot schemes across
their various business units to test CDR. It is
anticipated that this change in emphasis will
result in far fewer cases being automatically fed
into the litigation process. In turn, this will ease
the pressure on the tax tribunal as more disputes
are resolved through a collaborative process.
3
Ernst & Young
, February 2010, http://www.ey.com/TPC

18
O ? In the US, for example, the Post-Appeals Mediation process
mediation and can resolve disputes (such as Post-Appeals enables taxpayers to bring an issue before a mediator,
Mediation in the United States or independent mediation
in the Netherlands): In some cases, it may not be possible settlement negotiations between Appeals and the taxpayer.
to reach agreement between taxpayers and tax authorities In the United Kingdom, HMRC recently established a small
alone. In these instances, independent mediation may dispute resolution unit, which is looking at how to embed
!
" ADR approaches into the work of the organization, which
between the two parties. will rely on facilitative mediation, rather than arbitration.
Mutual Agreement Procedure as an ADR process
Deborah M. Nolan and Frank Ng are Ernst & Young Tax an emerging area of discussion and in the context of
Controversy and Risk Management partners and are both alternative dispute resolution, a very important one.
former Commissioners of the IRS’ Large and Medium-Sized
Frank: And it can provides options for taxpayers; they
Business (LMSB) unit. In this conversation, they discuss
may choose to resolve their dispute at the exam level or
the shifting use of Competent Authority and the Mutual
have the competent authority resolve it based on the best
Agreement Procedure (MAP):
overall outcome for the taxpayer.
Frank: I see an emerging trend where the nuances of
Debbie: Exactly. What you might have — I’ll put it here in
the mutual agreement procedure can be applied as an
the US context — is that a company may have a transfer
alternative dispute resolution tools. Quite often clients
pricing audit in the United States. They will seek to resolve
do not understand the mutual agreement procedure and
the issue under US tax law with the IRS. They could settle
do not recognize that they can achieve resolution of a
it at the exam level or go to appeal and settle. If they
double tax matter while mitigating future controversy
choose to settle with the IRS, the foreign jurisdiction
and achieveing global issue certainty. In many transfer
on the other side of the equation may not accept that
pricing disputes, a taxpayer’s strategy may be to seek
settlement. And they may say ‘well, we will only give you
early resolution via competent authority as opposed to
relief for a certain amount because you already settled.

There is no more discussion on any further settlement. You
going to competent authority. I think that in the main
agreed with the US and that’s what we are accepting, we
we are going to see a growing demand for competent
don’t accept that here in our country’. So, you may end up
authority resolution because governments are beginning
with a portion that is double taxed. As opposed to if you

don’t have that settlement, there is no binding agreement
issues.
and the issue goes untainted to the two competent
Debbie: Right. Companies are more and more concerned authorities to resolve.
about their transfer pricing policies and methodologies
Frank: And issues like this highlight the importance of
in jurisdictions in which they operate because the tax
really understanding the mutual agreement procdure and
administration practices and approaches are all different.
how it should be incorporated into your tax controversy
And so while a company may believe that they could
and risk management strategy. Understanding MAP is
have one uniform policy that could be adapted globally,
essential in today’s global tax environment.
countries may not accept that policy. I think that’s

19
)
that taxpayers may try and abuse the ADR process in order
India to weaken the tax authority’s litigation position, as opposed
to using it as a genuine method to resolve a dispute and it
The introduction of an Alternative Dispute Resolution
remains to be seen whether this eventuality will occur.
mechanism, announced as part of the Indian government’s
2009 budget, has attracted widespread interest from It is expected that the new mechanism will help to resolve
multinationals with business interests in India not least disputes a considerable shorter period reducing the time
since the new rules, which are designed to improve India’s taken to achieve resolutions from three to four years under

L V present structure to about one and half years under the
reputation as of one of the most litigious countries in the ADRM process. Interestingly, in the period between launch
world. in early January 2010 and late February, the DRP panels
received close to 800 transfer pricing-related applications and
Under the previous appeals process, an order passed by a Tax
nearly 600 applications concerning other international tax
~ Z L$
issues4.
(Appeals), and thereafter, the Income Tax Appellate Tribunal
(ITAT), a process which could ordinarily take a considerable Indeed, the original DRP process was launched with 8 such
number of years to pass through the courts and which would panels around the country (with two panels each in Mumbai
require the taxpayer to deposit some portion of the disputed and Delhi), but in letters of 10th and 17th February 2010,
tax amount upfront. Alternatively, foreign companies could the CBDT increased the number of panels to 11.
choose the enter approach the Authority for Advance
As with the introduction of any major new process, however,
Rulings (AAR) or the Competent Authority under the Mutual
the implementation of the DRP mechanism has not been
Agreement Procedure (MAP).
completely plain sailing. The DRP sponsors have found that
The 2009 budget announcement saw the unveiling of plans

for a series of Dispute Resolution Panels (DRP) around the large organization has been a challenge. Besides putting in
country which aim to resolve disputes — particularly those place the enabling legislation, it requires a change in attitudes
deriving from transfer pricing issues - at the pre-assessment of the assessing authorities, and many business processes
stage. The new proposals, introduced to the Government by relating to appeals and enforcement.
a Coalition of international investors who were supported by
Some companies entering the DRP mechanism have
Ernst & Young focused on the introduction of a new process
questioned the independence of the panel, while others have
under which taxpayers will have the option to have an
noted that, in the early months of operation in particular,
assessment order reviewed by an independent panel made up
there may have been a tendency for the DRP to simply rubber
of three Commissioner or Directors of Income Tax prior to its
stamp existing assessments. With the Indian government
$
reiterating it‘s objective of reducing litigation in all areas,
months of the case proceeding.
the Finance Minister has constituted a special task force to
The panel has the ability to vary the assessment order and its develop an action plan to reduce tax disputes and litigation.
decisions will be binding on the Indian tax administration, but In this context, announcements concerning improvements
in an announcement made on 20 February 2010, the Central to the functioning of DRP are likely to be seen in the near
$ &Z$= future. The Coalition of companies who originally worked with
the DRP process was optional to the assessee, and that the the India government to bring the DRP scheme to life plans
assessee can opt out of the DRP process at any time and to engage in a dialogue with the special task force to explore
appeal before the Commissioner of Income Tax (appeals) ways of making the DRP system more effective.
as per the standard appeal route. There is some concern
4
Disputes leave a revenue hole — Financial Express (India) — February 23 2010

20
'

It seems likely that 2010 will be a watershed year in the
$ ~
resolution. In June 2010, the ATO published its “Large
Business and Tax Compliance Booklet5”, which signalled both
a more rigorous approach to the risk assessment of taxpayers
and the greater use of alternative dispute resolution. In
the same month, the Federal Parliament passed the Civil
Disputes Resolution Bill6, which aims to improve access to
justice by requiring prospective litigants to attempt to resolve
disputes before they reach the courts. Taken together, these
developments highlight a radical change in mindset for the
authorities that could herald a sharp reduction in the number
of disputes that are brought before the courts.
The new Bill will require taxpayers and the ATO to compile
a “genuine steps statement” for the courts that describes
the efforts made to resolve the dispute or explains why no
such steps were taken. These steps could include agreeing
to participate in direct negotiations before entering into
litigation, bringing the matter before a mediator or arbitrator,
or exchanging information between the two parties so that
$
that the ATO must consider these ADR approaches at three
@# ?

only two hotspots and disputes were generally resolved via
$~
forms of ADR that enable the use of third-party mediation.
Passing such ADR processes as this into law represents a
V
otherwise will be closely monitored by other jurisdictions.
5
http://www.ato.gov.au/corporate/content.asp?doc=/content/33802.htm
6

L
*<*<*$ +'

21
HMRC’s Collaborative Dispute Resolution signals a change of tactic

The announcement in 2007 that HMRC would move Dave Hartnett, the Permanent Secretary for Tax has said
to a Litigation Settlement Strategy (LSS) marked a that “HMRC should be litigating less,” which suggests
_ ? that the pendulum could be swinging back in the other
to the establishment of the LSS, senior tax inspectors direction. In a late 2009 interview with Ernst & Young,
were encouraged to manage disputes autonomously with } { !

little input from either policy or any central technical having a review process prior to embarking on litigation.
co-ordination. Although this inevitably led to a degree “I’m very attracted to the approach I’ve seen in the US
of inconsistency of treatment, it did ensure that formal and one or two other countries of having an internal,
litigation was kept to a minimum. independent review before the button is really pressed
for litigation to start,” he said. “I think part of my role at
The LSS effectively turned this approach on its head.
HMRC is sometimes to say to all of our people: ‘This issue
According to the new model, advice would be sought on
is not really for litigation; we can’t do it.’”

ultimately, the HMRC legal support in their Solicitor’s Although the LSS model will remain in place, there is likely
~` ! to be greater emphasis on the settlement aspects of the
< strategy. HMRC has said that it will introduce Collaborative
litigated. HMRC also reserved the right to litigate even Dispute Resolution (CDR), which will encourage
when the chance of success was deemed to be less than inspectors, clients and advisors to settle apparently
<
intractable disputes. This may include techniques such
as the use of third-party mediators, joint instructions
This new model brought greater consistency of treatment,
to Counsel and training of HMRC in negotiation and
but it led to a dramatic increase in litigation. After just
settlement skills.
three years, the current backlog of cases in the Solicitor’s
~ *<+< HMRC will operate a number of pilot schemes across their
years of work, with more than 150,000 HMRC enquiries various business units to test CDR. It is anticipated that
being open for more than 18 months. this change in emphasis will result in far fewer cases being
automatically fed into the litigation process. In turn, this
Recognizing that this approach will not be sustainable over
will ease the pressure on the tax tribunal as more disputes
the longer term, the view within HMRC is changing.
are resolved through a collaborative process.
“ HMRC’s approach to its large business customers in
recent years has been to focus on outcomes designed to businesses, and to do that within 28 days as the
to improve the attractiveness of the UK business tax

administrative environment. This has taken in the four
themes that business told us would make a difference: extended clearance service, and since then we have
certainty, risk management, speedy resolution of introduced operational improvements to make the
issues and clarify through effective consultation. service even more user friendly. We see our clearance
An expansion of our service in providing advance services as making a key contribution to upstream
agreements and clearances has been a key element dispute resolution which both delivers greater
of meeting businesses’ need for greater certainty. In certainty for our customers and helps us to focus our
addition to our universally available clearance services post-return efforts on dealing with the greatest tax
relating to recent legislation, and various statutory and compliance risks and on resolving disputes as
clearances provided in particular areas of the tax code,
#
since April 2008 we now aim to provide clearances Geoff Lloyd — HMRC,
on any areas of material uncertainty around the tax speaking to Ernst & Young

22
Factors to consider

2
! !
$

) )
1

! !

"

“The strategy that says that

most taxpayers want to pay
the right tax at the right
time involves a certain leap
of faith, certainly a leap of
faith for HMRC employees,
and here’s a question mark
as to whether or not all

trusting relationship. But
where we’ve invested in
that — and I’m thinking in
particular of large business
and the relationship that
we hold with large business
customers, where we
differentiate on the basis
!
trusting relationship are
absolutely clear.”
Geoff Lloyd, HMRC
23
Laying out an ADR strategy and that there will be a genuine attempt to
executing it well, however, is neither resolve issues by the tax administrator
simple nor easy. Several factors should in order to make the necessary
be considered in determining how (and investment and provide a level of
to what level of commitment) an ADR transparency.
strategy is developed and executed:
Cultural shift
-
! $
The successful execution of an ADR
Aligned with the increased focus on
corporate governance related to tax risk thinking — and behavior — on the part
management, a solid ADR strategy can of both parties to seek resolution to
provide more opportunities to manage issues, whether on a one-off or ongoing
risk proactively and strategically. basis. This cultural shift needs to occur
not just in the minds of the tax function
%

leaders; in those cases where a decision
3
to enter full enhanced relationship
Taxpayers can achieve a higher level processes (such as Horizontal
of certainty, sooner, by using ADR Monitoring) is taken, the cultural shift
processes. With the implications of may need to be managed right from
the board level down to all tax function
tax positions and the emphasis on team members.
disclosure and transparency by tax
Both the taxpayer and the tax
administrators around the world, this
administration must be resolution-
factor becomes increasingly important
minded and be willing to work
to consider as a core driver of an ADR
collaboratively to seek an appropriate
strategy.
result. They must recognize that
4
complexity and ambiguity can often lead
to uncertainty and that the appropriate
Time-consuming and costly litigation
result can often fall within a range.
can be avoided. A shift to ADR
5
terms of time and resources. Skilled
Some issues have potential multiyear
professionals can be diverted away from
impact, which may affect the
longstanding disputes, and backlogs of
approach to resolution. This includes
open issues can be cleared.
opportunities to spread agreements
over multiple years.
In many cases, the ADR can enable 5
taxpayers to establish a more productive
Some issues may also have
and collaborative relationship with tax
multijurisdictional impact which could
administrations that can transcend the
affect the resolution approach. As ADR
immediate issue at hand. Leading tax
processes become more widespread
administrations, following the post-crisis
around the world and tax administrators
tone set by the OECD, are increasingly
work more collaboratively with one
looking to improved relationships with
another, increased opportunities to
large taxpayers as the way forward.
leverage a bilateral or multilateral
Fairness and transparency approach to dispute resolution may
become possible.
Taxpayers need assurance that they


24
6
!
Develop an overall tax risk management strategy Ensure that appropriate local resources, competencies
Companies should develop and assess overall tax controversy are in place
and risk management strategy, of which an ADR strategy is Across all jurisdictions requiring action, ensure that you have
one core component. All activities within the strategy should appropriately skilled resources in place who understand the
be planned from a global perspective, because this is how tax processes, their operation, their strengths and weaknesses
administrations are increasingly viewing them. and the cultural approach of the taxing authority.
Understand your current state Assess any immediate opportunities
Assess your inventory of current and future issues across Co %
the dimensions of tax types, years and jurisdictions. to help reduce your overall level of tax risk as it relates to
Understand the implications of placing each issue within urgent issues, such as the new Uncertain Tax Positions
your ADR strategy, paying close attention to the multiyear schedule in the United States.
and multilateral implications. Group and prioritize the issues
% Secure support, if necessary, at board level
If the ADR strategy includes entering into a wider, enhanced
Understand the local processes, cultural approach and relationship process with a tax administration, this typically
willingness of tax administrations to engage with you includes disclosing tax positions through the course of the
Developing intelligence on the range of options available year to gain clearance on each issue. Gaining support of the
to you in each key jurisdiction is imperative in developing board can be a time-consuming, complex, but very necessary
your dispute resolution strategy. Alongside understanding step in the process.
the physical processes in each jurisdiction, ensure that you
develop your “tax administration intelligence” regarding Develop your action plan
the cultural approach, level of openness and overall level of Using your prioritized inventory of issues and local
! intelligence of ADR processes and cultural mindsets, create
meet your objectives. a multiyear action plan which includes resource planning,
milestones, reporting and key performance indicators.
Ensure that systems, processes and documentation
are all in order
With a marked increase in information-sharing among tax
administrations, data relating to a position disclosed in one
%
may be shared with another tax administration elsewhere.
Systems, processes and documentation all need to take this
into account before information is readily disclosed.

25
Conclusion
Companies that are successful in “Tax administrators are exchanging information and
managing their tax controversy and
!

collaborating with their foreign counterparts, looking at
developing a strategy and executing it global companies through a ‘global lens.’ Companies must
well. They can leverage opportunities manage their risk and controversy from a global standpoint.
to use resolution tools and processes
in countries to help facilitate closure of
Knowing the relationships and what dispute resolution tools
disputes and the resolution of issues, are in place for each country, where their risks lie and how to
often without costly and time-consuming mitigate them have become essential requirements.”
litigation. As it becomes increasingly
important to build tax risk management Deborah M. Nolan
thinking into the planning and Former commissioner of the IRS
compliance processes, the knowledge Large and Mid-size Business Division

%
resolve disputes become increasingly
important as well. For global companies,
the challenge of handling varied
issues for different years in different
stages of controversy using different
resolution processes across multiple
jurisdictions can be overwhelming. The
forecast for the future is only more
complex. With an in-depth knowledge
%
advocacy techniques and alternative
dispute resolution tools, businesses can
anticipate, address and resolve issues in

cost-effective manner.

26
ADR processes in
country jurisdictions
27
31
30
Australia
29 Brazil Canada 32
33
Belgium China
European
34 35
Union
France Germany
37 38 39
Hong Kong India
40 41 42
Italy
Japan South Korea Mexico
43 45 46 48
The
Singapore South Africa
Netherlands
49 50 52
Russia
Turkey United Kingdom United States
27
Ernst & Young contact
Australia Howard Adams

Howard.Adams@au.ey.com
+61 2 9248 5601
Brief description of available Australia has a number of Alternative Dispute Resolution processes.
Alternative Dispute Resolution
processes
Description of the processes Process 1 Process 2 Process 3 Process 4

What is the process called? Annual Compliance Informal settlement as Alternative Dispute Alternative Dispute
Agreements set out by the ATO’s Resolution in the Resolution in the Federal
Code of Settlement Administrative Appeals Court of Australia
Practice Tribunal including: including:
O Z O }
O } O
O Z
O Z
O

When was it introduced? 2008 1991 2005 1991
Is the process settled in law? Is the No it is not settled in The ATO must follow this Yes it is contained in the Yes it is contained in the
process fully documented? law. This is a relatively code, pursuant to Law Administrative Appeals Federal Court of Australia
new process which the Administration Practice Tribunal Act 1975 (Cth). Act 1976 (Cth)
$~ Statement PS LA 2007/6
Guidelines for settlement
documented however of widely-based tax
a speech outlined by disputes
the Commissioner of
Taxation has set out the
requirements at a high
level. http://www.ato.
gov.au/print.asp?doc=/
content/00139238.htm
? % % ? % ?% ?% ?%
How does the process work? The ACA process is $$~ One of the above The Act states that any
% determine if a matter ADR processes may proceedings may be
involves the taxpayer is appropriate for be conducted by a referred to the Court to
and ATO engaging in settlement. If the matter mediation or arbitration;
early dialogue on tax is deemed appropriate, Administrative Appeals however the Court will
risks with a view to the settlement process Tribunal. Information not refer a matter to
identifying high-risk will usually involve a provided at ADR cannot arbitration without the
matters requiring negotiation forum, be used at a later consent of the parties.
resolution and providing where the ATO is hearing unless parties Most mediations are
sign-off on low risk always represented agree. Where agreement conducted by registrars,
matters, thus ensuring $ is reached between the but occasionally the
greater certainty to the negotiations are parties during ADR, the Court will refer the case
taxpayer in a real-time conducted on a ‘without Tribunal will allow the to an external lawyer to
manner. prejudice’ basis. If an parties seven days to conduct the mediation.
agreement is reached, reconsider and withdraw What transpires during
the terms are always from the agreement if
captured in a deed of they choose.
settlement.

28

These characteristics
were emphasised by
comments provided by
Michael D’Ascenzo, the
Australian Commissioner
of Taxation in an
interview with
Ernst & Young1, where
he said “If we are able
to reduce the risk with
the taxpayer upfront,
we provide them with
practical certainty,
they get on with their
business, [it’s] good for
the economy and we
don’t have disputes after
the event. So to me it’s
a no-brainer it’s a better
way of doing things”.
Is there a user fee to use the No No No, unless an external No, unless an external
process? ADR practitioner is lawyer is engaged.
engaged.
What types of tax issues does the Corporate Income Tax The Code is not Not restrictive Not restrictive
process cover? (eg Valuation, and Goods and Services restrictive
timing, Transfer pricing, Tax
transactions, other)
Advance Pricing Agreements Australia has a formal APA program, which is accessible to taxpayers subject to the
ATO’s discretion. The APA team receives approximately 20 to 30 APA requests from
in Australia ?
load. The average duration of the APA process is approximately 8 months in the case
of unilateral APAs and 16 months in the case of bilateral APAs. Top treaty partners that
have concluded bilateral APAs with Australia are Japan, the United States, the United
Kingdom and New Zealand.
1
$? Z

+<<^

29
Belgium An Meheus
an.meheus@be.ey.com
+32 (0)2-774.9457
Koen Marsoul
Koen.Marsoul@be.ey.com
+32 (0)2-774.9954
Brief description of available Belgium has two main ADR processes available; A Ruling Procedure involves the upfront
Alternative Dispute Resolution agreement of an issue prior to a transaction occurring, while mediation in tax matters
provides a mechanism for resolution of existing disputes.
processes
Description of the processes Process 1 Process 2

What is the process called? Ruling procedure Mediation procedure for tax matters
When was it introduced? 2002 2007
Is the process settled in law? Is the process Yes Yes
fully documented?
? % % ? % ?%
How does the process work? L % $ \
within 2/3 weeks by e-mail. with the Belgian tax authority, which can be
done by mail, e-mail, fax.
A memo is typically drafted which explains
the envisaged transaction and is sent to the Within 15 days, the mediation service
Belgian Ruling Commission one week before communicates to the taxpayer if the request
% is admissible or not. As an example for income
\
The meeting with the Belgian Ruling
Commission that can be held on a no names tax assessment by the taxpayer.
basis in order to obtain their thoughts on the
envisaged transaction. The meeting is not Moreover, the mediation will end if the Regional
mandatory, however as the Belgian Ruling Director has taken a decision or if a procedure
Commission will likel have still some additional Z &
\ % there are exceptions as a mediation request
preferable to send them a draft ruling in
advance to be sure that all issues are covered taxes).
in the ruling. Normally it takes one or two
No appeal is possible against the conclusions or
weeks to obtain their feedback.
recommendations of the mediation service.
The formal ruling should be send by registered
Please note that the mediation service was
mail and by e-mail to the Belgian Ruling
operational as of June-July 2010 and it is
Commission. In principle it takes three to four
therefore it is too early to say how the process
months for the delivery of the formal ruling.
will work in practice.
Is there a user fee to use the process? No No
What types of tax issues does the process Personal income tax, corporate income tax, All taxes levied by the federal government
cover? (eg Valuation, timing, Transfer pricing, transactions, transfer pricing and also regional taxes that are collected by
transactions, other) the federal government (e.g. registration
= \
for local taxes (e.g. from the provinces and
communes).
Advance Pricing Agreements The 2003 corporate tax reform introduced a general ruling practice under Belgian tax
law. Additional guidance in this respect is provided through various Royal Decrees. As
in Belgium a result of the law of 21 June 2004, the Service for Advance Decisions became an
autonomous department (led by a committee of four) as of 1 January 2005. More
than 100 specialists in various domains of taxation, including transfer pricing, assist
$
"
&
APAs). This committee is also able to rule prospectively on corresponding downward
*+
planning opportunities.

30
Brazil Romero J.S. Tavares

Romero.tavares@br.ey.com
+55 112 573 3444
Júlio C. Assis
julio.assis@br.ey.com
+55 112 573 3309
Brief description of available Brazil has a number of Alternative Dispute Resolution processes. These include Binding
Rulings, Administrative Litigation, and Tax Amnesty Programs. The Binding Ruling
Alternative Dispute Resolution and Administrative Litigation processes are very mature, and have existed in Brazil for
processes $?

time repeatedly over the course of the last decade.
Binding rulings can only provide resolution for future circumstances, and are often not
practical for effectively resolving matters of material relevance/Over the last decade,
the Administrative Litigation process has been perceived to work very well, while the
Tax Amnesty Programs have also been shown to be effective.
Description of the Process 1 Process 2 Process 3

processes
What is the process Consulta (General Binding Processo Administrativo Fiscal (Administrative Tax Litigation) — Tax Amnesty Programs
called? Ruling) distinguished from Judicial litigation which must involve an attorney. (multiple instances)
When was it At the Federal Level: with the At the Federal Level: with the Brazilian National Tax Code of The programs were
introduced? Brazilian National Tax Code 1966 (Law 5.172/66), and Law 9.784/99, and subject to further enacted at the Federal,
of 1966 (Law 5.172/66) and regulation in 1972 under Decree 70.235 (as amended). Similar State and Municipal levels
subject to further regulation in administrative litigation proceedings are available at the State level. and remained in force for
1972 under Decree 70.235.
Is the process settled in Yes Yes Yes
law? Is the process fully
documented?
? % % ? % ?% ?%
unrealized facts
How does the process It works whenever a doubt At the Federal level: Within 30 days after a Tax Infraction Notice is The process varies
work? in the application of the tax served (or after a Notice of Inconsistency is served), the taxpayer in accordance with
law is raised. The taxpayer is has 30 days to submit a Protest Letter to the competent branch the Program, but in
required to describe detailed of the Federal Revenue Authority (SRF). A Decision is rendered general it requires
facts that he is considering by the competent Delegate of the Federal Revenue Authority. If voluntary disclosure
to realize in the future and and a formal declaration
the rules he believes are $
Z by the taxpayer to
applicable to such facts. of Tax Appeals (Conselho Administrativo de Recursos Fiscais) cease and desist of any
which is an agency of the Ministry of Finance, sister to the Federal administrative or judicial

^ ~' $ litigation of an asserted
Representatives of the SRF as well as Representatives of the SRF tax claim. It typically

Z Z'Z'
includes the reduction or
in multiple chambers and sessions, presided by representatives of forgiveness of interest
^'
and penalty charges,
the Superior Chamber of Tax Appeals (CSRF), which comprises key and it may also include
representatives from CARF. other incentives for the
settlement.
Is there a user fee to No No No
use the process?
What types of tax Tax treatment of future facts. All infra-legal issues under Tax Law and all technical issues under Varies in accordance with
issues does the process Tax Law (and related Corporate of Civil Law). The process does not the program.
cover? (eg Valuation,
Z $ Z"
timing, Transfer pricing,
Advanced Pricing Agreements Brazil does not have a formal APA program. The authorities consider that the implementation
in Brazil of the statutory margin system has helped minimize subjective judgments in the auditing
phase and avoids the need for a complex and expensive APA structure.

31
Canada Gary Zed

gary.zed@ca.ey.com
+1 613 598 4301
Brief description of available Alongside Advance Pricing Agreements, Canada provides Advance Tax Rulings as well
Alternative Dispute Resolution as a rarely-used arbitration process. These processes are fairly mature and both APAs
and advanced rulings are considered to work well.
processes
Description of the processes Process 1 Process 2 Process 3

What is the process called? Advance Tax Rulings Settlement process for Appeals Mediation process for Appeals
When was it introduced? Circa 1972 Longstanding policy Longstanding policy
Is the process settled in law? Is the This is an administrative process — This is an administrative process, This is an administrative
process fully documented? no legislation — and guidance by the not set out in law process, not set out in law
Canada Revenue Agency (CRA) is
provided in Information Circular IC
70-6R5
? % % ? % & % = ?% & ?% &
Notice of Objection stage) Notice of Objection stage)
How does the process work? "
Taxpayer has legal right to object Taxpayer applies to CRA’s
all the facts about a proposed to any assessment. CRA Appeals Appeals Branch for mediation.
transaction(s), the purpose of the has legislative authority to review An agreement is entered
proposed transaction(s), rulings
into outlining the issues to
requested, analysis in support of or vary any assessment of tax. be mediated. A neutral third
the rulings, and must pay a fee. The The taxpayer may enter into party is selected as mediator.
CRA will then review the request settlement discussions; these are The process is non-binding.
and dialogue with the taxpayer as without prejudice. If successful, a If successful, a settlement is
necessary to clarify aspects of the settlement agreement is reached. reached. If not, the assessment
ruling request. The taxpayer waives subsequent
$
right of appeal to the Tax Court of taxpayer may appeal that
Canada. decision to the Tax Court of
Canada.
Is there a user fee to use the Yes, based on the time spent by No No; costs are usually shared on
process? CRA. A deposit of $500 is required a 50/50 basis
to be included with the ruling
request.
What types of tax issues does Any tax issues — only questions More appropriate for factual than More appropriate for factual
the process cover? (eg Valuation, of law, not fact. Not applicable to interpretive disputes than interpretive disputes
timing, Transfer pricing, valuation issues.
Advanced Pricing Agreements The CRA launched its APA program in July 1993. As set out in its Information Circular
in Canada 94-4R, it offers taxpayers the opportunity to pursue unilateral, bilateral or multilateral
APAs. In addition, the CRA has made a small business APA program available to
Canadian taxpayers under certain conditions. The CRA charges taxpayers only travel
costs it incurs in the completion of an APA.
On 20 August 2008, the CRA issued TPM 11, which discussed the CRA policy with
respect to rolling an APA back to prior years. The main limitation imposed by TPM 11
is that APAs may not be rolled back to years for which a request for contemporaneous
documentation has been issued. Effectively, this means that APAs cannot be rolled
back to taxation years under transfer pricing audit.
An updated version of IC94-4R is expected to be released soon.

32
China Lynn Wang

Lynn.Wang@cn.ey.com
+86 10 5815 3993
Brief description of available China has multiple Alternative Dispute Resolution processes, including tax collection on
Alternative Dispute Resolution deemed basis (TCDB), Advanced Pricing Agreement (APA), and Administrative Review
(AR). The processes are documented in law and regulation, with TCDB and AR being
processes more mature than APAs. In practice, the Chinese tax authorities may agree to negotiate
with taxpayers in advance on the tax treatments on certain transactions on a case- by-
case basis.

What is the process called?
& Tax collection on deemed basis Administrative Review (AR)
name) (TCDB)
When was it introduced? Case-by-case basis 1982 1991
Is the process settled in law? Is the No Yes Yes
process fully documented?
? % % ? % ? % ?%
How does the process work? As Chinese tax laws and regulations China tax authority applies A taxpayer who disagrees
basically only provide general TCDB on certain taxpayers, in with an act or decision of
principles, their implementation is particular small-scale taxpayers, a tax authority has a right
typically subject to local practice
&~= to seek an administrative
and interpretation. Chinese tax permanent establishments (PE) review. The reviewing body
authorities are open to taxpayers’ of foreign companies in China. The is not independent from the
requests for discussions to clarify common TCDB options include tax authority, but rather
alternative tax treatments on deemed taxable revenue, deemed an internal department/
certain issues in advance. However, committee.
such discussion usually will not income.
result in written rulings issued
by the tax authorities. The views
received from the tax authorities
therefore carry uncertainties and
may be disputed by higher level tax
authorities or other locations.
Is there a user fee to use the No No No
process?
What types of tax issues does the All issues All issues
process cover? (eg Valuation, accounting records or accounting
timing, Transfer pricing, records kept outside of China
Advance Pricing Agreements APAs are available in China. Guidance regarding the APA process and procedures is
in China provided in Articles 46 through 63 of Guoshuifa (2009) No. 2. The validity of an APA

of operating history before applying for an APA and the ban on enterprises with major
tax evasion history has been lifted as well. Annual related-party transaction volumes
must only be greater than or equal to RMB 40m, rather than the previously required
RMB 100m. Applications for APAs involving more than one in-charge province can be
submitted directly to the SAT in Beijing.

33
European Union An Meheus

an.meheus@be.ey.com
+32 (0)2-774.9457
Koen Marsoul
Koen.Marsoul@be.ey.com
+32 (0)2-774.9954
Brief description of available EU arbitration procedure, designed to be used where a dispute has commenced.
processes
Description of the processes Process 1

What is the process called? EU arbitration convention
When was it introduced? 1990
Is the process settled in law? Is the process fully documented? Yes — it is an EU convention
? % % ?%
How does the process work? There is a mutual agreement procedure in order to reach consent to
eliminate double taxation. If no agreement is reached, there is the
advisory commission procedure that can deliver an opinion on how the
double taxation should be eliminated. This opinion can be binding.
Is there a user fee to use the process? No
What types of tax issues does the process cover? (eg Valuation, timing,
Transfer pricing, transactions, other)

34
France Charles Menard

charles.menard@ey-avocats.com
+33 1 55 61 15 57
Brief description of available

' %
Alternative Dispute Resolution mechanisms
processes

What is the process called? Rescrit établissement Rescrit valeur (« Rescrit « abus de droit Rescrit “crédit d’impôt
stable (“permanent valuation ruling ») » (« abuse of law recherche” (“tax research
establishment ruling”) ruling”) credit”)
Is the process settled in law? Is the Yes Yes Yes Yes
process fully documented?
? % % ? % ? % ? % ? %
How does the process work? On the company’s On the shareholder’s On the company’s On the company’s
initiative. The company initiative. The initiative. The company initiative. The company
\ \ \
describes the foreign a ruling request describing the contract, describing the research
entity, the activity in including: gift’s the act, the legal and development
France (nature, human act, nature of the situation at stake and operation at stake vs.
and material resources, given shares/assets, explaining the aim of other research and
nature of the clientele, description of the the situation development operations
nature of the French company justifying the already performed by the
establishment, information valuation, description company; expected aim
about French employees, of the valuation and results; complete
functional job analysis), methods. description of the
role of the French company operation; estimated costs
within the group. (including staff).
Is there a user fee to use the No No No No
process?
What types of tax issues does the Opposable administrative Valuation Opposable Opposable administration
process cover? (eg Valuation, opinion whether a PE administrative opinion opinion about the eligibility
timing, Transfer pricing, exists in France about the tax legality of of research expenses to
transactions, other) contracts, transactions. the tax research credit
Advance Pricing Agreements Bilateral and, under certain circumstances, unilateral APAs, are available (Article L
in France 80 B 7° of the French Procedural Tax Code). This section was provided by the Finance
Amendment Act for 2004 and has come into force since 1 January 2005. It incorporates
existing procedures as described by the French administrative guideline #4 A-8-99 dated 7
^ *
&{£ =
On 28 November 2006, the FTA released a new administrative guideline (#4 A-13-06),
?
online guide pertaining to transfer pricing methods.
The process requires that, in theory, the submission has to be performed at the latest 6

L
there is no roll-back possibility.
Besides and following a tax reassessment, taxpayers can request the introduction of a
mutual agreement procedure (on the ground of tax treaty or the European Arbitration
Convention) in order to avoid double taxation resulting from the reassessment. On
23 February 2006, the FTA published administrative guidelines (#14 F-1-06) specifying the
scope and the conditions to be met for the introduction of such procedure.
35
Germany Dr. Jürgen Schimmele

Juergen.Schimmele@de.ey.com
+49 211 9352 21937
Brief description of available Germany has a number of ADR processes in place, and APAs are also available. The
Alternative Dispute Resolution ADR processes are relatively mature, especially binding rulings which have been in
existence for many decades.
processes

What is the process called? Verbindliche Auskunft Anrufungsauskunft Verbindliche Zusage Tatsächliche Verständigung
(General Binding Ruling) (Binding Ruling for im Anschluss an eine (Final Settlement in form
Wage Tax Purposes) Außenprüfung (Binding of a mutually binding
Ruling after Closure of a agreement)
Tax Audit)
When was it introduced? General binding rulings 1925 1977 $ @
used to be based on settlement” refers to a
case law since 1961. legal institute developed by
They became part of the case law
German Fiscal Code in
September 2006 and are
subject to charges since
December 2006.
Is the process settled in law? Is the Yes Yes Yes No, however it is
process fully documented? documented by numerous
Federal Tax Court decisions
and acknowledged by the
Federal Ministry of Finance
in a detailed decree in
2008
? % % ? % ? % ? % ?%
limited to unrealized facts.
How does the process work? Taxpayer is required Upon application, After the closure of a If the facts underlying
to describe detailed tax audit, the taxpayer the taxation can only
unrealized facts that he is rule about the wage can apply for a binding be determined with
considering to realize in tax (withholding ruling regarding the disproportionate efforts,
the future. He has to refer tax) treatment of future tax treatment of the involved parties
in detail to an uncertainty facts stated in the facts that were subject can settle the factual
of tax law how to treat the application. to the tax audit. uncertainty by reaching a
planned facts. mutual agreement
Is there a user fee to use the Yes, based on the No No No
process? economic value the
question has for the
taxpayer (in general
difference of taxes). In
case the economic value
cannot be assessed, the
tax authority charges
based on time spent with
100 EUR per hour.

36

What types of tax issues does the Tax treatment of future Wage tax issues See above. Settlement relates only
process cover? (eg Valuation, facts, that are not covered (withholding tax) to past circumstances.
timing, Transfer pricing, by other ADR processes If circumstances agreed
transactions, other) upon show continuity
and relate to the future,
the binding effect may
also have an impact on
the future tax handling if
intended by the parties.
Advance Pricing Agreements APAs are generally available. The German Ministry of Finance issued an APA circular
in Germany ~ +<<¤ ?

regard to the negotiation of APAs. Additionally, the Annual Tax Act 2007 introduced
fees for APAs. The administrative competence for APAs is centralized in the Federal
Z $~$? !

years from application to conclusion. An agreement reached between two competent
authorities will be made conditional in two regards: the taxpayer must consent to
the intergovernmental agreement, and must waive its right to appeal against tax
assessments to the extent they are in line with the contents of the APA.

37
Hong Kong Joe Chan

joe-ch.chan@hk.ey.com
+852 2629 3092
Brief description of available In Hong Kong, there are Alternative Dispute Resolution processes, namely Advance
Alternative Dispute Resolution Ruling and Appeal to the Board of Review (“BOR”): (i) Advance Ruling — a taxpayer
may request for a ruling in advance from the Hong Kong Inland Revenue Department
processes (“IRD”) on how any provisions of the Inland Revenue Ordinance (“IRO”) apply to
him or to the arrangement described in the application. (ii) Appeal to the BOR — a
~
Commissioner of Inland Revenue (“CIR”).

What is the process called? Advance Ruling service Appeal to the Board of Review
fully documented?
? % % ? % ?%
How does the process work? A taxpayer may apply in writing to the Inland A taxpayer may lodge an appeal to the BOR
Revenue Department (“IRD”) for a ruling on a ZLV
seriously contemplated transaction. The ruling determination on his objection. The BOR is
independent from the IRD, and consists of a
ruling. The Commissioner may withdraw the chairman who has legal training and experience
ruling anytime by notifying the applicant in and two members from all walks of life. After
writing with the reason for the withdrawal. If ~
a taxpayer does not agree with the ruling, he annul, reduce or increase the assessment.
may lodge an objection when the assessment
is raised.
Is there a user fee to use the process? Yes. Depending on the nature of the issue to No, but the BOR may order the taxpayer to
be ruled, a fee of HK$10,000 to HK$30,000 pay HK$5,000 as a cost if it considers that the
has to be paid in submitting the application. An appeal is frivolous.
additional fee may be charged if the time spent
in considering the application exceeds the
budgeted hours. The additional fee is calculated

involved at their respective charge out rate.
What types of tax issues does the process All issues except those matters which are All issues
cover? (eg Valuation, timing, Transfer pricing, primarily a question of fact e.g. capital gain
Advance Pricing Agreements Hong Kong does not provide for Advance Pricing Agreements. Although the Hong
in Hong Kong Kong Inland Revenue Departmental Interpretation Practice Note ("DIPN") 46 released
in December 2009 provided welcome details on their interpretation and practices on
a range of transfer pricing methodologies and issues, it did not provide any further
insight into whether Hong Kong may adopt an APA strategy at some point in the future.

38
India Rajan Vora

Rajan.Vora@in.ey.com
+ (91) 22 6665 5610
Brief description of available India does have ADR processes in place. Advance Rulings have been available during
Alternative Dispute Resolution the course of the last decade, while the introduction of a Dispute Resolution Panel in
+<<
processes

What is the process called? Advance Rulings. Dispute Resolution Panel.
When was it introduced? These have been introduced over the last 2009
decade.
Is the process settled in law? Is the process Yes — relevant legislation in the Income-tax Act, Yes — relevant legislation was introduced in the
fully documented? 1961, Authority for Advance Rulings Rules. Income-tax Act, 1961 during the year 2009,
and Dispute Resolution Rules, 2009.
? % % ? % % ?%
respect of questions pending before Tax
Authority
How does the process work? $$ L% $$
(non-resident and resident having transaction $~
with non-resident) can apply for the before the Dispute Resolution Panel (collegium
determination of income or the tax treatment of three Commissioners) without paying any
of the income of non-resident arising from the demand.
proposed transaction with non-resident. Also
Public sector undertakings can apply for ruling
with respect to computation of income.
Is there a user fee to use the process? Yes INR 2,500 No
What types of tax issues does the process All the tax issues relating to the tax liability of The tax issues relating to foreign company and
cover? (eg Valuation, timing, Transfer pricing, non-resident, except valuation, transfer pricing transfer pricing.
transactions, other) etc.
Advance Pricing Agreements ^ ** $Z+<*<
in India on APAs which shall be applicable from 1 April 2012. In this connection, the CBDT
(highest administrative body) will notify the scheme of APA for the international
transaction.

39
Italy Maria Antonietta Biscozzi Enrico Ceriana

maria-antonietta.biscozzi@it.ey.com enrico.ceriana@it.ey.com
+39 02 851 4312 +39 02 851 4222
Brief description of available Italy has various Alternative Dispute Resolution processes, designed to settle tax audit
reports, tax assessments and litigation. It is also possible to ask for the position of
Alternative Dispute Resolution Italian tax authorities on a peculiar situation regarding the taxpayer. The processes are
processes relatively mature.
Description of the Process 1 Process 2 Process 3 Process 4

processes
What is the process called? Ruling Acquiescence to the tax Settlement Procedure Judicial Settlement
audit report Procedure
Is the process settled in Yes Yes Yes Yes
law? Is the process fully
documented?
? % % ? % ?% ?% ?%
How does the process A Ruling consists of a A company may accept Settlement Procedure Judicial Settlement
work? request to the Italian tax all the challenges arising consists onf an agreement Procedure consists of an
authorities concerning a from the tax audit report. on the higher taxes due agreement on the higher
In this case the Company between the taxpayer taxes due between the
the taxpayer. In this way $~L taxpayer and the Tax
it is possible to know the request before the relevant company reaches such ~L
position of the Italian tax $~ such agreement the
days dating from the motivated report would litigation is settled. The
a tax return. The answer be drawn up, showing the penalties due are reduced
should be available within report. Afterwards the amount of taxes, interest to 1/3 of the applicable
*+< $~ and penalties due. The amount.
of the request, but that penalties due are reduced
term is interrupted if Italian for the total amount of to 1/4 of the minimum
tax authorities ask for taxes with the related applicable amount.
further documentation. In interest and claiming for
this case the term of 120 penalties reduced to 1/8
day stars again once the of the minimum applicable
amount.
L

within 120 days the
solution proposed by the
taxpayer is considered as
accepted.
Is there a user fee to use No No No No
the process?
What types of tax In principle all items In principle all items In principle all items Any items concerning tax
issues does the process concerning corporation tax concerning corporation tax concerning corporation tax litigation.
cover? (eg Valuation, and VAT are covered. and VAT are covered. and VAT are covered.
timing, Transfer pricing,
Advance Pricing Agreements The Italian government introduced a unilateral ruling system mainly relating to transfer
pricing, dividends and royalties. The law has been enacted with the “Provvedimento
in Italy del Direttore dell’agenzia delle entrate,” dated 23 July 2004. This document provides
a number of practical guidelines to apply and conduct the ruling program. Since Italy
provides a variety of tax rulings, the interactions between the APA and the other tax
rulings should be evaluated on a case-by-case.

40
Japan Taichi Haraguchi

taichi.haraguchi@jp.ey.com
+81 3 3506 2679
Brief description of available Japan does not have an ADR process, except Advanced Pricing Agreements (APAs).
Alternative Dispute Resolution In Japan, entering into a written agreement with a tax authority regarding taxpayer’s
tax liability is not permitted because tax law is recognized as the complete and ultimate
processes
Z\

original return. In a tax lawsuit, the court will not allow a settlement report to be made
between the parties. Therefore, “virtual settlement” between the tax authority and
\
the tax authority, and withdrawal of the action by the taxpayer.
That said, the Japanese tax authorities do provide for some form of Taxpayer Advance
L\ L
\
certain conditions (eg tax treatment of a certain transaction is not made clear under
the tax law), the tax authority will respond to the query in writing.
Advance Pricing Agreements Unilateral and bilateral APAs are available, though the NTA prefers bilateral. APA
in Japan guidelines are included in the Administrative Guidelines.
$$ %
TNMM.
$$ ? ++~ +<<
?
\ ?

?$$ ?

the proposed APA.
{
L

starts between 1 November 2008 and 1 November 2009, the transition rule applies.
The transition rule indicates that the APA application is due eight months after the
due date of the tax return for the last year before the covered period. In practice, this


41
South Korea Dong Chul Kim

dong-chul.kim@kr.ey.com
+82 2 3770 0903
Brief description of available Recently the Korean tax authorities (National Tax Service, "NTS") introduced
Alternative Dispute Resolution "advanced tax ruling system" which is very similar to US IRS private letter rulings that

processes
Description of the processes Process 1

What is the process called? Advanced Tax Ruling System (“ATRS”)
When was it introduced? Effective from October 1, 2008
Is the process settled in law? Is the process fully documented? ATRS is documented not in tax law, but within NTS’s instruction (i.e., it
is a directive).
? % % $ % %

either ongoing or planned in the near future.
How does the process work? A taxpayer submits a written advanced tax ruling request to NTS along

$^

written opinion on the interpretation of tax laws to the taxpayer.
Is there a user fee to use the process? No
What types of tax issues does the process cover? (eg Valuation, timing, $
Advance Pricing Agreements Unilateral and bilateral APAs are available under the LCITA. In order to encourage
in Korea the application of APAs, the NTS does not require an application fee, and the LCITA
$^ ?
In addition, the Korean tax authority is making all efforts to shorten the time being
! ?'
Annual Report on APAs which includes information such as statistics on the type of
APAs being concluded, the countries that are counterparties to APAs, time taken to
process APA cases, etc.

42
Mexico Santiago Chacon

santiago.chacon@mx.ey.com
+525 5528 31449
Jorge Libreros
jorge.libreros@mx.ey.com
+525 5528 31300
Brief description of available Mexican Tax legislation provides for a range of Alternative Dispute Resolution processes
including non-binding rulings, Administrative appeal, and the Advanced Pricing Agreements.
processes In addition to the above mentioned, treaties signed by Mexico provide the mutual agreement
procedure as an alternative to dispute a resolution, as well as the arbitration method in case
of the Mexico-Canada treaty. Furthermore, the Netherlands, treaty which has been recently
renegotiated, provide that if a new tax treaty executed by Mexico contains any disposition
?

established by the OECD Model of Tax treaty, then such provision would be automatically
applicable to the treaty. A Mexico-Switzerland treaty (signed, but not currently in force)
provides a similar condition.

What is the process called? Rulings/Administrative Appeals Advanced Pricing Agreements Treaty’s Mutual Agreement Procedure/
(Transfer Pricing) Arbitration
th
When was it introduced? Rulings and Administrative Appeals December 30 1996. Mutual agreements since April 8th 1991 (First
exist in Mexican law at least since treaty signed by Mexico), arbitration since/
st
December 31 1981. Arbitration since September 12th, 2006.
Is the process settled in law? Is Yes Yes These processes are provided by treaties.
the process fully documented?
? % % ? % ? % ? % %
How does the process work? \ The interested party This process is regulated by the tax treaties
time. The request should be made requests an advanced pricing agreed by Mexico and thus the process may
stating the background, facts and differ depending on the treaty that is being
circumstances and should be made purposes all the necessary applied. However typically in this process the
before the tax authorities start an documentation, data, and tax authorities of the countries involved in the
audit on the topics contained in the information. By this Advanced disputed resolution engage in negotiations
ruling request. Rulings will cease Pricing Agreement the to solve the referred dispute./Currently,
to be valid if the circumstances taxpayer can agree and justify arbitration has only been agreed and is in
change or if the law change. The the prices that will correspond force on the Mexico-Canada and the Mexico-
tax authorities need to issue to operations with foreign Netherlands treaty, however some of the most
an answer within 3 months/ related parties. recently negotiated or renegotiated treaties
Administrative appeals should be provide that when Mexico agrees an arbitration
disposition in the future, this will automatically
apply to these treaties as well.
The appeal ruling should be issued
within 3–5 months following the

Is there a user fee to use the No Yes No
process?
What types of tax issues Rulings can be requested only Transfer Pricing These procedures are used for cases in which
does the process cover? (eg to the extent these refer to real double taxation may be occurring.
Valuation, timing, Transfer facts and circumstances on any
pricing, transactions, other) tax law matter/Administrative
appeals cover any tax law and tax
procedural issues.
Advance Pricing Agreements Unilateral and bilateral APAs are available under Article 34-A of the Federal Fiscal Code
in Mexico } V _ ?

\ % !

43
The Netherlands Arjo van Eijsden

arjo.van.eijsden@nl.ey.com
+31 88 40 78411
Brief description of available The Netherlands has multiple Alternative Dispute Resolution processes, including
Alternative Dispute Resolution ‘Horizontal Monitoring’ and ‘Mediation’. In April 2005 the Dutch Tax Authorities
commenced a pilot named ‘Horizontal Monitoring’ involving 20 of the largest corporate
processes
authorities.
Mediation has been introduced by means of a pilot in 2004 by the Dutch Tax
Authorities. In January 2005 the Dutch lower Chamber accepted mediation as part of
the tax procedures. Since April 2007 every court offers parties the opportunity to solve
tax disputes by means of mediation.
At the end of 2005 also the Dutch Tax Authorities offered mediation as a way of
alternative dispute resolution. The mediators are employees of the Dutch Tax Authority,
but they are in practice totally independent.

What is the process called? Horizontal Monitoring Mediation
When was it introduced? April 2005 January 2005
Is the process settled in law? Is the Participating tax payers usually formalize their and In January 2005 the Dutch lower Courts accepted
process fully documented? the Tax Authorities’ responsibilities and obligations mediation as part of the tax procedures. Since
by entering into a so called Compliance Agreement April 2007 every court (not the Supreme Court)
(‘handhavingsconvenant’). This agreement is a offers parties the opportunity to solve tax disputes
voluntary agreement and either party can withdraw by means of mediation. At the end of 2005 also
from it at any time. the Dutch Tax Authorities offered mediation as a
method of Alternative Dispute Resolution.
? % % ? % &^ Z ?%
forward-looking it generally applies as of the date of
signing, however usually concluding a Compliance
Agreement is combined with a settlement

catch-up and a start with clean sights)
How does the process work? The Horizontal Monitoring regime can be } "
characterized as a form of voluntary disclosure. concerned parties try to solve their dispute their
selves without judgment of a judge. A mediator will
Under this regime the taxpayer promises to actively
"

notify the Tax Authorities of any issues with a
judgment on the tax content of the dispute.
!
facts and circumstances regarding these issues If parties come to an agreement, this agreement
without hesitation or reservation. In turn, the will be documented in a settlement agreement
Tax Authorities promise, having received such which will be signed by both parties.
disclosure, to provide timely advice on disclosed
!
real commercial deadlines when doing so. In

agreed time frame and the Tax Authorities impose
tax assessments as soon as possible after receipt
of the return and where possible in consultation
with the tax payer. As such both tax payer and the
Tax Authorities will focus on the present in stead of
focusing on the past.

44

Is there a user fee to use the process? No No, however if a court refers the parties to

After this time, the costs are split amongst the
parties. Mediation is offered by the Dutch Tax
Authorities without charge.
What types of tax issues does the The Compliance Agreement typically covers all tax Mediation typically covers all tax types.
process cover? (eg Valuation, timing, types.
Advance Pricing Agreements Unilateral, bilateral and multilateral APAs with rollback features are available. The APA
in the Netherlands process currently operates well in the Netherlands, despite earlier criticism regarding
?
&=? %
meetings with taxpayers to discuss the case before a formal APA request is made,
support for small taxpayer APAs and case management plans have been introduced
and processing time has been reduced.
'

&
intercompany interest) and licensing (mere receipt and payment of intercompany
= ' ?
+<<' ?
had been functioning successfully for a number of years already by 2005. A number of

+<<
which mainly relate to a reduction in the applicable transfer pricing documentation
requirements.

45
Russia Alexei Nesterenko

alexei.nesterenko@ru.ey.com
+7 495 662 9319
Alexandra Lobova
alexandra.lobova@ru.ey.com
+7 495 705 9730
Brief description of available ` %

Alternative Dispute Resolution ' |% $
two mechanisms for pre-trial dispute resolution.
processes
What is the process called? Filing written disagreements to the tax Administrative appeal to the higher tax
authority which issued an act authority
Is the process settled in law? Is the process Yes. The process is described in the Tax Code of Yes. The process is described in the Tax Code of
fully documented? the Russian Federation the Russian Federation
? % % ? % ? %
How does the process work? If a taxpayer disagrees with statements made In cases where the director (or deputy
in the tax audit report, he could present director) of the tax authority adopts a
to the appropriate tax authority written decision on the imposition of sanctions for
disagreements relating to the report as a whole the commission of a tax offence or a decision
or to individual points therein. A tax audit on the non-imposition of tax sanctions for the
report and other materials relating to a tax commission of a tax offence the taxpayer has
audit in the course of which violations of tax the right to appeal that decision to the higher
and levy legislation were found, and written tax authority.
objections presented by the audited taxpayer
A judicial appeal against a decision on the
in relation to that report are examined by the
imposition of sanctions for the commission of a
director (deputy director) of the tax authority
tax offence or a decision on the non-imposition
which performed the tax audit.
of tax sanctions for the commission of a tax
The taxpayer has the right to participate offence may be lodged only after an appeal
in the process of the examination of the against that decision has been lodged with a
materials. However, the process is not a kind of higher tax authority.
negotiation with tax authority. It is just the way

Upon the results of processing of the

abovementioned materials and objections the
director (deputy director) of the tax authority
adopts a decision.
Is there a user fee to use the process? No No
What types of tax issues does the process All types All types
cover? (eg Valuation, timing, Transfer pricing,
Advance Pricing Agreements APAs are not allowed under the current legislation, but it is included in the draft law.
in Russia The APA program would be available from 1 January 2012 and at the initial stage it
might be available only for “major taxpayers.” Both unilateral and bilateral APAs are
expected to be available.

46
Singapore Lim Gek Khim

gek-khim.lim@sg.ey.com
+65 6309 8452
Jesper Solgaard
jesper.solgaard@sg.ey.com
+65 6309 8038
Brief description of available Advance rulings are available and provide greater clarity and certainty to taxpayers on
Alternative Dispute Resolution the interpretation of provisions in the Income Tax Act and the Goods & Services Tax
Act. For transfer pricing issues, an Advance Pricing Agreement (APA) process is also
processes available.

What is the process called? Income Tax Advance Ruling Goods & Services Tax Advance Ruling
When was it introduced? 1 January 2006 1 July 2007
Is the process settled in law? Is the process Yes (Section 108 and Seventh Schedule of the Yes (Section 90A and Fifth Schedule of the
fully documented? Income Tax Act (ITA)); Goods & Services Tax (GST) Act);
Inland Revenue Authority of Singapore (IRAS) IRAS circular dated 11 January 2010 (sixth
* +<<&
= edition)
? % % ? % ? %
How does the process work? Submission of an application form together Submission of an application form together
with payment of an application fee and a with payment of an application fee not later
written ruling in a prescribed format not later *
than 2 months before the date of the proposed the relevant GST return or 1 month before
arrangement (except in the case of an express the transaction date, whichever is applicable.
advance ruling). Different timeline applies for an express ruling.
Singapore tax authorities review application Singapore tax authorities review application
and the ruling request is acceptable, it will write and the ruling request is acceptable, it will write
to seek additional information if applicable to seek additional information if applicable
and usually upon receipt of the information it and usually upon receipt of the information it
will issue a letter of offer to set out the terms will issue a letter of offer to set out the terms
under which the ruling will be issued. The under which the ruling will be issued. The
terms include the expected timeline and the terms include the expected timeline and the
additional ruling fee payable. additional ruling fee payable.
Taxpayers who accept the terms has to Taxpayers who accept the terms has to
formally submit a letter of acceptance to the formally submit a letter of acceptance to the
Singapore tax authorities to acknowledge Singapore tax authorities to acknowledge
acceptance within 7 days. acceptance within 3 days.
Is there a user fee to use the process? In addition to a non-refundable application In addition to a non-refundable application
fee of S$525 (plus GST),a time-based fee fee of S$525 (plus GST),a time-based fee
is charged for the time taken to provide the is charged for the time taken to provide the
ruling, as well as any costs and disbursements ruling, as well as any costs and disbursements
incurred in connection with the ruling. An incurred in connection with the ruling. An
additional fee is charged if the CIT agrees to additional fee is charged if the CIT agrees
give an express advance ruling. to give an express advance ruling. If the
Comptroller of GST requires the advice of an
external adviser with the relevant expertise or
professional knowledge, the applicant will be
informed of such a need before hand and the
fees (if any). The applicant may then decide
whether to withdraw or proceed with his
request.
What types of tax issues does the process Corporate and individual income tax issues GST issues relating to a particular business
cover? (eg Valuation, timing, Transfer pricing, (not concerning what the law clearly provides, &
transactions, other) and not involving the interpretation of a foreign involving the interpretation of any foreign law)
law or any DTAs)

47
Advance Pricing Agreements Unilateral, bilateral and multilateral APAs are available in Singapore and were
in Singapore introduced in February 2006. However, for bilateral and multilateral APAs, there
must be a double tax agreement between Singapore and the other involved country
or countries. The Singapore Transfer Pricing Guidelines outline the procedures for
applying for an APA. Further procedural guidance on the APA process has been
provided in the IRAS circular “Supplementary Administrative Guidance on Advance
Pricing Arrangements” issued in October 2008. The circular applies to APA requests
made after 20 October 2008 and includes guidance on the following:
O ^
?
O $ L^ V? \
O $

APA is requested
O $@ %!# ?

48
South Africa Brigitte Keirby-Smith

Brigitte.KeirbySmith@za.ey.com
+27 31 576 8161
Brief description of available ^ $

Alternative Dispute Resolution Tax Ruling (“ATR”) process and the second is the ADR process. The ATR (binding
general, class and private rulings) provides resolutions for future transactions while
processes the ADR process is aimed at resolving disputed tax positions with the South African
Revenue Service (“SARS”).
Both the ADR and the ATR process are relatively new in SA (ADR approx 6 years and
ATR 4 years).
In my experience, the ADR and ATR processes are used quite extensively by SARS
and taxpayers to resolve disputes. As both are relatively new there have been some
criticisms around application.

What is the process called? Advanced Tax Rulings (“ATR”). This includes Alternate Dispute Resolution (“ADR”)
Binding Private Rulings, Binding Class Rulings
and Binding General Rulings.
When was it introduced? First introduced in 2006 First introduced in 2003
fully documented?
? % % For Private and Class rulings this process is a ?%

% $§ assessments.
the SARS and apply to all taxpayers.
How does the process work? For Private and Class rulings, the taxpayer Where a taxpayer is aggrieved by an
makes an application to the SARS for a ruling assessment and wishes to appeal the SARS’
on a prospective transaction. The taxpayer is decision it may request the ADR process to
required to detail the proposed transaction, either agree or settle the dispute. SARS has the
document the relevant legislation and discretion to decline this request but is required
determine an applied outcome which will form to give reasons for such which the taxpayer can
the basis of the required ruling. also contest.
Is there a user fee to use the process? Yes. There is an application fee and a cost No
recovery fee. The latter fee is determined with
reference to the complexity of the matter and is
charged on an hourly basis.
What types of tax issues does the process Technically all taxes are covered but there Technically any disputed matter can be taken
cover? (eg Valuation, timing, Transfer pricing, are certain tax issues that have been “scoped to ADR. However, the SARS does have the
transactions, other) out” of the ATR process. These exclusions discretion to decline this request where it is of
include, inter alia, transfer pricing, valuations, the opinion that the matter is not appropriate
issues currently under dispute with the SARS for ADR. The taxpayer may context this view of
the SARS.
service provider, labour broker or independent
contractor.
Advance Pricing Agreements in South Africa does not offer Advance Pricing Agreements.
South Africa

49
Turkey ¨©!ª
erdal.calikoglu@tr.ey.com
+90 212 368 5375
Brief description of available Turkey has multiple Alternative Dispute Resolution processes, including Tax Settlement
Alternative Dispute Resolution (Reconciliation), Advance Pricing Agreement (APA) and Tax Return with Reservation.
The Tax Settlement and Reservation process are relatively mature, however Advance
processes Pricing Agreements were only introduced into Turkey with the New Corporate Tax Code
No.5520 dated 2006 and became applicable starting from the year 2007.

What is the process called? Tax Settlement Tax return with reservation (followed by tax
court case)
Is the process settled in law? Is the process Yes — well documented with the Tax Procedures Yes — regulated in the Tax Procedure Code
fully documented? Code No.213 and the Regulations on Tax No.213 and Law on the Procedure of the
Settlement. There are two types of settlement Administrative Judicial No.2577
— Tax Settlement Before Assessment and Tax
Settlement After Assessment
? % % ?% ?%
assessment accordingly would be followed by a
court case
How does the process work? There are different types of tax settlement. $
with reservation and in most cases the tax
Tax Settlement Before Assessment application

is made during the tax inspection and
reservation of the taxpayer. Following the
the settlement meeting is held at the tax
assessment, against the reservation of the tax
inspectors’ level.
payer, a court case should be initiated at the
Tax Settlement After Assessment is made tax court within 30 days. Then there would be
< a tax litigation procedure, which would end-up
tax assessment receipts. The meeting is held at at the Council of State level.
the Tax Settlement Committees (within the tax
} '
=
In both types the taxpayer may apply to court

*
of the minutes of the meeting where no
settlement is achieved.
Is there a user fee to use the process? No There are fees to be paid at the court level,

court case
What types of tax issues does the process All tax issues All tax issues
cover? (eg Valuation, timing, Transfer pricing,
Tax court case may include hearing, however
transactions)
principally the judgment would be made
through the documents presented within the

Advance Pricing Agreements An APA is possible upon the demand of the taxpayer. In principle, the agreed-upon
in Turkey method would be binding through the period determined; however, it cannot exceed
? § $ $~
taxpayers as of 1 January 2008 for their foreign transactions. Other taxpayers were
able to apply for APAs as of 1 January 2009.

50
United Kingdom Chris Oates

coates@uk.ey.com
+44 (0) 207 751 3318
Brief description of available The United Kingdom has a number of Alternative Dispute Resolution processes,
%%
document, HMRC in the UK are in the process of piloting a Collaborative Dispute
processes
%

What is the process called? $ % The High Risk Corporate ?%

Alternative Dispute Resolutions Programme seeks to address Resolution/Collaborative
processes in the UK. These include; issues relevant to companies Dispute Resolution.
ATCA, Statutory Clearances HMRC consider to be high risk.
(COP10), and Non Statutory
Clearances, etc.
When was it introduced? These have been introduced over 2007 Not yet in operation. To be
the last decade. introduced in 2010/2011
Is the process settled in law? Is the Yes — relevant legislation and in the Documented — not settled in law Documented — not settled in
process fully documented? HMRC International Manual law
? % % ? % ?% ?%
How does the process work? Under all clearances the process A process by which disputes are UK tax authorities are
involves the tax payer notifying resolved for a small number of introducing the Collaborative
HMRC of the proposed transaction large corporate businesses that Dispute Resolution scheme
and then either obtaining a are deemed to be high risk. to focus on ways by which
clearance for a tax treatment or they and tax payers can agree
In general HRCP focuses on ways
clearance being denied. settlement to enquiries. There
by which UK tax authorities and
may be common issues across
ATCA (Advanced Thin Capitalization taxpayers can achieve certainty
a range of tax payers and it
Agreement) — A company can seek on a number of open issues. This
may be easier to deal with
to enter into a forward agreement process is undertaken at board
UK tax authorities on a group
with HMRC setting out the terms level.
basis to ensure consistency
on which HMRC will accept that
Both sides commit to a mutually
the company's interest payments
agreed target date for resolution the resolution.
represent an arm's length cost of
of the enquiry and negotiation
borrowing. Agreements are usually This is likely to be introduced in
process. All open issues are

2010/2011.

years, Although an agreement
a time tabled action plan is agreed.

earlier period it may be applied
in some cases where facts and
circumstances are materially
consistent.

51

Non Statutory Clearances — include
what were known as COP10
clearances and are available to both
businesses and non businesses. A
non-statutory clearance is written
_ V
view of the application of tax law

that the taxpayer can rely on in
most circumstances, as our view
of the tax consequences of your
transaction.
Statutory Clearance — a process

by which disputes are resolved or
clearance from UK tax authorities
is obtained by the taxpayers before

process?
What types of tax issues does the Most of the key tax issues are Most of the key tax issues are Most of the key tax issues are
process cover? (eg Valuation, covered, including valuation, timing, covered, including valuation, covered, including valuation,
timing, Transfer pricing, transfer pricing, transactions etc. timing, transfer pricing, timing, transfer pricing,
transactions, other) transactions etc. transactions etc.
Advance Pricing Agreements Section 85-87 of the Finance Act of 1999 introduced legislation on APAs. A Statement
in the United Kingdom of Practice published in September 1999 supplements this legislation. Bilateral
and unilateral APAs are available, but bilateral APAs are preferred. For APAs to be

compliance with the arm’s length standard. Limited resources limit the UK to around
18-20 new admissions to the program each year.

52
Ernst & Young contacts

Debbie Nolan Frank Ng
debbie.nolan@ey.com frank.ng@ey.com
+1 202 327 5932 +1 202 327 7887
United States Elvin Hedgpeth

elvin.hedgpeth@ey.com
+1 202 327 8319
David Canale
david.canale@ey.com
+1 202 327 7653
Brief description of available The United States has a number of Alternative Dispute Resolution processes, most of
Alternative Dispute Resolution which are relatively mature.
processes

What is the process called? -)8

9-8: 1 - 9:
-
91-: -

When was it introduced? 2000 2005 2003
Is the process documented? Yes — Rev. Proc. 2009-14 Yes — Announcement 2005-87 Yes — Rev. Proc. 2003-36
? % % ? % ? % ? %
How does the process work? The PFA program enables the CAP allows taxpayers and the IRS The IIR Program is intended
taxpayer and the IRS to resolve, to resolve issues before tax returns to resolve frequently disputed
% % or burdensome tax issues
treatment of an issue otherwise auditing. CAP requires extensive
! % cooperation between the Service number of business taxpayers
examinations. An eligible taxpayer and participating taxpayers. through the issuance of
may request a PFA for the current Throughout the tax year, these published guidance. IRS solicits
taxable year, any prior taxable year taxpayers are expected to engage suggestions for issues from
for which the original return is not in full disclosure of information taxpayers, representatives
yet due, and up to four taxable years concerning their completed and associations for the IIR
beyond the current taxable year. business transactions and their Program. For each issue
A PFA that makes determinations proposed return treatment of selected for the program,
for the current taxable year (and all material issues. Participating a resolution team of IRS
any prior taxable year for which a taxpayers that resolve all material (examination and Appeals),
return is not yet due) is a closing issues will be assured, prior to Chief Counsel and Treasury
agreement under section 7121. A personnel is assembled to
PFA that includes a determination the Service will accept their tax gather and analyze relevant
for one or more future taxable information for the issue and
years is a non-statutory agreement % then develop and recommend
— a binding contract between the examination will be required. If all guidance.
Service and the taxpayer. issues cannot be resolved prior

program will identify the remaining
items that will need to be resolved
through traditional examination

and attestation by the taxpayer
that any material issue for which
there is a reserve has been
disclosed and discussed assures
the tax administrator of substantial
compliance.

53

Is there a user fee to use the Yes — US $50,000, payable within No No
process? 15 days of acceptance of the PFA
application.
What types of tax issues does the The IRS will consider entering into Taxpayers participating in CAP Business tax issues appropriate
process cover? (eg Valuation, a PFA on any issue that requires may seek to resolve all material for the program will generally
timing, Transfer pricing, either a determination of facts or issues concerning completed have at least two of these
transactions, other) the application of well-established business transactions and the characteristics:
legal principles to known facts. The proposed return treatment thereof
O $
Service also will, in general, consider for the current year.
a common factual situation
entering into a PFA regarding a
is uncertain.
methodology used by a taxpayer to
determine the appropriate amount O $
of an item of income, allowance, in frequent, and often
deduction, or credit. Certain repetitive, examinations of
enumerated issues, such as transfer the same issue.
pricing or a change in method of
accounting, are not eligible for the O $
PFA program. taxpayer burden.
O $
impacts a large number of
taxpayers, either within an
industry or across industry
lines.
O $ \

factual development,
and an understanding of
industry practices and
views concerning the issue
would assist the Service in
determining the proper tax
treatment.

54

+1 202 327 5932 +1 202 327 7887

+1 202 327 8319
David Canale
david.canale@ey.com
+1 202 327 7653
processes

What is the process called? 9: Early Referral to Appeals 8 "$. 98".:
Process -

When was it introduced? 1994 1999 2001
Is the process documented? Yes — Rev. Proc. 94-67 Yes — Rev. Proc. 99-28 Yes — Rev. Proc. 2003-40
? % % ?% Post-Filing Post-Filing
How does the process work? AIR is a process to advance the Where one or more developed, The Fast Track Settlement
resolution of issues arising from unagreed issues exist during program uses the mediation
an audit of a taxpayer from one the course of an examination, skills and delegated settlement
or more tax periods to other tax eligible taxpayers may request authority of Appeals to resolve
periods. An eligible taxpayer and that the examination team refer issues while still under the
the IRS may enter into an AIR such issues to Appeals, while the jurisdiction of the Large
agreement with respect to an issue examination team continues to Business and International
arising from an audit for the years audit other issues. Established division (previously the LMSB).
under examination and apply that Appeals procedures apply to Early Whereas a formal written
result via a closing agreement to all Referral issues. If an agreement is protest must generally be
reached with respect to an Early prepared by the taxpayer
to the date the closing agreement Referral, a closing agreement is in order to send an issue
is signed. generally prepared. The closing to Appeals, the Fast Track
agreement is used to compute program requires only a
the corrected tax as a partial one-page application and the
agreement prior to or concurrently taxpayer’s response to the
with the resolution of any other Form 5701 containing the
issues in the case. issue(s) in dispute. Once the
case is accepted into the FTS

will serve as a facilitator
to arrive at and execute a
resolution or settlement that
is mutually agreeable to all
parties. If an agreement is

may use delegated settlement
authority to enter into and
approve the agreement,
or LMSB and the taxpayer
may resolve the issue using
LMSB resolution authority
and include it as an agreed
issue in the revenue agent’s
report. If the parties are
unable to resolve the issue, the
taxpayer retains the option of
requesting that the issue be
heard through the traditional
Appeals process. Ex parte is
waived by the taxpayer.

55

process?
What types of tax issues does the An AIR agreement may generally Generally, any issue arising during FTS is generally available for all
process cover? (eg Valuation, be entered into with respect to the examination that has been issues under the jurisdiction of
timing, Transfer pricing, any issue arising from an audit of fully developed, but on which the LMSB. However, certain issues
transactions, other) a large corporate taxpayer and taxpayer and examination team do
not agree. including issues for which
other taxable periods. However, the taxpayer has submitted
certain issues are excluded or a request for competent
\
authority assistance or issues
functions. in a taxpayer’s case designated
for litigation.
Advanced Pricing Agreements $L^?? ~ |
in the United States APAs, as well as bilateral and multilateral APAs with competent authority, as provided
in Rev. Proc. 2006-9. The revenue procedure has strict case management procedures,
disclosure requirements, and detailed guidance for taxpayers and the IRS in submitting
APA requests and processing the analyses. Competent authority guidance is provided in
Rev. Proc. 2006-54, which compliments the requirements of Rev. Proc. 2006-9.

56

+1 202 327 5932 +1 202 327 7887

+1 202 327 8319
David Canale
david.canale@ey.com
+1 202 327 7653
processes

What is the process called? Private Letter Ruling
#;)<;
#;)<=
When was it introduced? N/A 1997 N/A
Is the process documented? Yes — Rev. Proc. 2009-1 Yes — Delegation Order 236 Yes — Delegation Order 4-25
(Internal Revenue Manual (Internal Revenue Manual
1.2.43.38) 1.2.43.6)
? % % ? % Post-Filing Post-Filing
How does the process work? A taxpayer may request a written Where a taxpayer has entered into When Appeals issues written
~ a settlement (including hazards settlement guidelines for
Associate Chief Counsel in response settlements) with Appeals on an certain “coordinated issues,”
to the taxpayer’s written inquiry, issue, Delegation Order 4-24 gives Delegation Order 4-25
examination case managers the provides examination case
about its status for tax purposes authority to apply that settlement managers the authority to
or the tax effects of its acts or where the same issue is under accept settlements following
transactions. A letter ruling examination for other tax periods. the Appeals guidelines at the
interprets the tax laws and applies examination level.
V
of facts. A taxpayer may request
a closing agreement with a letter
ruling or in lieu of a letter ruling,
with respect to a transaction that
would be eligible for a letter ruling.
Is there a user fee to use the Yes, generally $11,500, though this No No
process? fee may be less, depending on type
of ruling requested.
What types of tax issues does the A letter ruling may be requested The underlying issue must Delegation Order 4-25 applies
process cover? (eg Valuation, on a number of issues related to have been settled by Appeals only to coordinated issues
timing, Transfer pricing, proposed or completed transactions. independently of other issues (e.g. for which Appeals has issued
transactions, other) However, the IRS ordinarily does not no trading of issues) in the settled written settlement guidelines.
issue a letter ruling if an identical tax period.
issue is involved in the taxpayer’s
return for an earlier period and that
issue is currently being examined,
in Appeals, or in litigation. The IRS
also maintains a listing of certain
enumerated areas in which letter
rulings will not be issued.

57

+1 202 327 5932 +1 202 327 7887

+1 202 327 8319
David Canale
david.canale@ey.com
+1 202 327 7653
processes

What is the process called? Post-Appeals Mediation - ) . ?
1
Consideration
When was it introduced? 1998 2000 N/A
Is the process documented? Yes — Rev. Proc. 2002-44 Yes — Rev. Proc. 2006-44 Yes — Rev. Proc. 2006-54
? % % ?% Post-Filing Post-Filing
How does the process work? The Appeals mediation procedure is The Appeals arbitration program This process coordinates
a non-binding process that uses the allows taxpayers to request simultaneous involvement
services of a mediator, as a neutral binding arbitration for factual of Appeals and competent
third party, to help Appeals and the issues that are already in the authority consideration
taxpayer reach their own negotiated Appeals administrative process. to expedite resolution of
settlement. To accomplish this goal, Under the procedure, the taxpayer the unagreed issue under
the mediator acts as a facilitator, competent authority
negotiate a settlement. If those jurisdiction before the issue
promotes settlement negotiations negotiations are unsuccessful, is presented to the foreign
between Appeals and the taxpayer. the taxpayer and Appeals may competent authority. The
Though the mediator has no jointly request binding arbitration. Appeals representative
authority to impose a decision, if Binding arbitration is available for will consult with the U.S.
successful, mediation can save time cases in which a limited number of competent authority during
and money by resolving the case factual issues remain unresolved this process to ensure
without litigation. following settlement discussions in appropriate coordination of
Appeals. the Appeals process with
the competent authority
procedure, so that the terms of
a tentative resolution and the
principles and facts upon which
it is based are compatible
with the position that the U.S.
competent authority intends
to present to the foreign
competent authority. Any
resolution reached with the IRS
under this procedure is subject
to the competent authority
process and, therefore, is
tentative and not binding
on the IRS or the taxpayer.
The conclusions of the
tentative resolution, however,
"
the U.S. position paper used
for negotiating a mutual
agreement with the foreign
competent authority.

58

Is there a user fee to use the No. However, if the taxpayer elects No. However, if the taxpayer No
process? to use a non-IRS co-mediator, the and Appeals select a non-IRS
taxpayer is responsible for the arbitrator, the taxpayer is
related expenses. responsible for one-half of the
related expenses.
What types of tax issues does the Mediation is generally available for Arbitration is available only Competent Authority issues.
process cover? (eg Valuation, all factual and legal issues. However, for factual issues. Moreover,
timing, Transfer pricing, Mediation is generally not available arbitration is generally not
transactions, other) for industry-wide issues, Appeals available for industry-wide issues,
Coordinated Issues, or for cases Appeals Coordinated Issues, or
or issues designated for litigation for cases or issues designated for
since the settlements of these issues litigation
have been circumscribed by other
procedures.

59
Stay up to date with the

shifting tax landscape
Tax administration without borders

G | "

!
at the same time, and governments are addressing this new environment by trying to protect revenues and co-operate as never before.
What does this mean for businesses that are trying to achieve certainty and reduce the risk of controversy? Tax administration without
borders looks at the unfolding trends in global tax administration and sets out a number of leading practices for businesses to consider
when protecting themselves against future tax controversy.
Download at '??? !
Tax administration without borders:

wealth under the spotlight
A
+<<

impact on the assets of high net worth individuals (HNWIs). At the same time, output in many advanced economies dropped precipitously,
while government revenues fell as economies slowed. With Governments having two levers they can pull to increase the revenues that
they collect from HNWIs — higher tax rates and increased tax enforcement — the spotlight is shining brightly on those most able to pay.
Download at '???

$? Z
£
E $?Z£ "

environment. The October 2010 issue includes an interview with Jeffrey Owens, chairman of the OECD’s Centre for Tax Policy and
Administration, as well as coverage of a range of other issues including transfer pricing, employment taxes, research incentives and
alternative dispute resolution processes.
Download at '???

60
Contacts
Country Tax policy Tax controversy
Email/telephone Email/telephone
Argentina Jorge Gebhardt Jorge Gebhardt
jorge.gebhardt@ar.ey.com jorge.gebhardt@ar.ey.com
+54 11 45102203 +54 11 45102203
Australia Alf Capito Howard Adams
alf.capito@au.ey.com howard.adams@au.ey.com
+61 2 8295 6473 +61 2 9248 5601
Belgium Herwig Joosten Johan Van Caillie
herwig.joosten@be.ey.com johan.van.caillie@be.ey.com
+32 (0)2 774 9349 +32 (0)2 774 9351
Brazil Romero Tavares Julio Assis
romero.tavares@br.ey.com julio.assis@br.ey.com
+55 1 12 112 5444 +55 1 12 112 5309
Canada Jim Morrisey Daniel Sandler
james.a.morrisey@ca.ey.com daniel.sandler@ca.ey.com
+1 613 598 4306 +1 416 943 4434
Chile Maria Javiera Contreras Macarena Navarette
maria.javiera.contreras@cl.ey.com macarena.navarette@cl.ey.com
+56 2 6761000 +56 2 6761679
China Becky Lai Owen Chan

becky.lai@cn.ey.com owen.chan@hk.ey.com
+86 10 58152830 +852 2629 3388
Colombia Margarita Salas Romero Tavares
margarita.salas@co.ey.com romero.tavares@br.ey.com
+57 1484 7000 +55 1 12 112 5444
Costa Rica Rafael Sayagues Ramiro Bravo
rafael.sayagues@cr.ey.com ramiro.bravo@mx.ey.com
+50622089880 +52 (81) 8152 1829
Denmark Niels Winther-Sørensen Niels Winther-Sørensen
niels.winther@dk.ey.com niels.winther@dk.ey.com
+4535872795 +4535872795
Dominican Juan Carlos Chavarría Pozuelo Ramiro Bravo
Republic juan-carlos.chavarria@cr.ey.com ramiro.bravo@mx.ey.com
(Also El +809 472-3973 +52 (81) 8152 1829
Salvador,
Guatemala,
Honduras,
Nicaragua)
Estonia Ranno Tingas Ranno Tingas
ranno.tingas@ee.ey.com ranno.tingas@ee.ey.com
+372 611 4578 +372 611 4578
European Klaus von Brocke Arjo van Eijsden
Union klaus.von.brocke@de.ey.com arjo.van.eijsden@nl.ey.com
+49 89 14331 12287 +31 10 406 8506
Finland Jukka Lyijynen Jukka Lyijynen
!! ® !! ®
+358 207 280 190 +358 207 280 190
France Charles Menard Charles Menard
charles.menard@ey-avocats.com charles.menard@ey-avocats.com
+33 (0)1 55 61 1557 +33 (0)1 55 61 1557

61

Georgia Alexandra Lobova Alexandra Lobova
alexandra.lobova@ru.ey.com alexandra.lobova@ru.ey.com
+7 495 705 9730 +7 495 705 9730
Germany Ute Witt Jürgen Schimmele
ute.witt@de.ey.com juergen.schimmele@de.ey.com
+49 3025 471 21660 +49 211 9352 21937
Hanno Kiesel
hanno.kiesel@de.ey.com
+49 711 9881 15266
Hong Kong Owen Chan Owen Chan
owen.chan@hk.ey.com owen.chan@hk.ey.com
+852 2629 3388 +852 2629 3388
India Satya Poddar Rajan Vora
satya.poddar@in.ey.com rajan.vora@in.ey.com
+91 11 4154 0000 +91 22 6665 5610
Indonesia Dodi Suryadarma Dodi Suryadarma
dodi.suryadarma@id.ey.com dodi.suryadarma@id.ey.com
+62 21 52895236 +62 21 52895236
Ireland David Smyth P.J. Henehan
david.smyth@ie.ey.com pj.henehan@ie.ey.com
+353 1 2212 439 +353 1 2212 420
Italy Maria Antonietta Biscozzi Maria Antonietta Biscozzi
maria-antonietta.biscozzi@it.ey.com maria-antonietta.biscozzi@it.ey.com
+39 02 8514 312 +39 02 8514 312
Japan Masaaki Ishida Masaaki Ishida
masaaki.ishida@jp.ey.com masaaki.ishida@jp.ey.com
+81 3 3506 2679 +81 3 3506 2679
Kazakhstan Alexandra Lobova Alexandra Lobova
+7 495 705 9730 +7 495 705 9730
Latvia Ilona Butane Ilona Butane
ilona.butane@lv.ey.com ilona.butane@lv.ey.com
+371 6704 3836 +371 6704 3836
Lithuania Kestutis Lisauskas Kestutis Lisauskas
kestutis.lisauskas@lt.ey.com kestutis.lisauskas@lt.ey.com
+370 5 274 2252 +370 5 274 2252
Luxembourg John Hames John Hames
john.hames@lu.ey.com john.hames@lu.ey.com
+352 42 124 7256 +352 42 124 7256
Malaysia Azhar Lee Azhar Lee
azhar.lee@my.ey.com azhar.lee@my.ey.com
+603 7495 8452 +603 7495 8452
Malta Robert Attard Robert Attard
robert.attard@mt.ey.com robert.attard@mt.ey.com
+35621342134 +35621342134
Mexico Carlos Cardenas Ramiro Bravo
carlos.cardenas@mx.ey.com ramiro.bravo@mx.ey.com
+52 (55) 5283 1320 +52 (81) 8152 1829

62

Middle East Mohammed Desin Mohammed Desin
mohammed.desin@sa.ey.com mohammed.desin@sa.ey.com
+96626671040 +96626671040
The Marnix van Rij Arjo van Eijsden
Netherlands marnix.van.rij@nl.ey.com arjo.van.eijsden@nl.ey.com
+31 70 328 6742 +31 10 406 8506
New Zealand Aaron Quintal Kirsty MacLaren
aaron.quintal@nz.ey.com kirsty.maclaren@au.ey.com
+64 9 300 7059 +61 8 9429 2208
Norway Arild Vestengen
arild.vestengen@no.ey.com
+47 24 00 25 92
Panama Luis Ocando Luis Ocando
luis.ocando@pa.ey.com luis.ocando@pa.ey.com
+507 208 0144 +507 208 0144
Peru Roberto Cores Roberto Cores
roberto.cores@pe.ey.com roberto.cores@pe.ey.com
+511 411 4468 +511 411 4468
Philippines Alf Capito Cirilo P. Noel
alf.capito@au.ey.com cirilo.p.noel@ph.ey.com
+61 2 8295 6473 +63 2 8910307
Poland Agnieszka Talasiewicz Agnieszka Talasiewicz
agnieszka.talasiewicz@pl.ey.com agnieszka.talasiewicz@pl.ey.com
+48 22 557 72 80 +48 22 557 72 80
Romania Alexander Milcev Alexander Milcev
alexander.milcev@ro.ey.com alexander.milcev@ro.ey.com
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Tax Dispute Resolution: A New Chapter Emerges: Tax Administration Without Borders

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Tax dispute resolution:

a new chapter emerges

The road to Alternative Dispute Resolution 06

ADR processes in country jurisdictions 26

Tax dispute resolution: a new chapter emerges

“ In today’s global environment and the context of what tax

Tax dispute resolution: a new chapter emerges

The road to Alternative

“I think that one of the

“ I do think there is a shared view on the parts of companies and tax

Increased taxpayer disclosure and information reporting

Tax dispute resolution: a new chapter emerges

Country name ? %   ? %   Advance pricing agreements

Advance Pricing Agreements

Tax dispute resolution: a new chapter emerges

Tax dispute resolution: a new chapter emerges

Tax dispute resolution: a new chapter emerges

Timeliness is also an issue. It may be         

enhanced those with an international dimension,

Tax dispute resolution: a new chapter emerges

Taxpayers considering participation

Tax dispute resolution: a new chapter emerges

Case study: TNT

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Tax dispute resolution: a new chapter emerges

“The ACA is an opportunity,

Tax dispute resolution: a new chapter emerges

Tax dispute resolution: a new chapter emerges

Dave Hartnett, the Permanent Secretary for Tax

Tax dispute resolution: a new chapter emerges

Mutual Agreement Procedure as an ADR process

Tax dispute resolution: a new chapter emerges

Tax dispute resolution: a new chapter emerges

  '        

Tax dispute resolution: a new chapter emerges

HMRC’s Collaborative Dispute Resolution signals a change of tactic

Tax dispute resolution: a new chapter emerges

“The strategy that says that

Tax dispute resolution: a new chapter emerges

Tax dispute resolution: a new chapter emerges

Tax dispute resolution: a new chapter emerges

Ernst & Young contact

Australia Howard Adams

Description of the processes Process 1 Process 2 Process 3 Process 4

Tax dispute resolution: a new chapter emerges

Description of the processes Process 1 Process 2 Process 3 Process 4

Tax dispute resolution: a new chapter emerges

Ernst & Young contact

Description of the processes Process 1 Process 2

Tax dispute resolution: a new chapter emerges

Ernst & Young contact

Brazil Romero J.S. Tavares

Description of the Process 1 Process 2 Process 3

Tax dispute resolution: a new chapter emerges

Ernst & Young contact

Canada Gary Zed

Description of the processes Process 1 Process 2 Process 3

An updated version of IC94-4R is expected to be released soon.

Tax dispute resolution: a new chapter emerges

Ernst & Young contact

China Lynn Wang

Description of the processes Process 1 Process 2 Process 3

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Timeliness is also an issue. It may be

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