Implementing Regulation on Mutual Agreement Procedure

s Yusuf Wangko Ngantung
s Veronica Kusumawardani
By Yusuf Wangko Ngantung, Veronica Kusumawardani
Yusuf Wangko Ngantung
Veronica Kusumawardani
The Director General of Taxes has issued a new regulation concerning the implementation of Mutual Agreement Procedure (MAP). The provisions are outlined in the Director General of Taxes Circular No. SE-49/PJ/2021 concerning Technical Guidelines for the Implementation of Mutual Agreement Procedure (SE-49/2021).
 
SE-49/2021 constitutes an implementing regulation of the Minister of Finance Regulation No. 49/PMK.03/2019 concerning Procedures for the Implementation of Mutual Agreement Procedure (MoF Reg. 49/2019) and Director General of Taxes Regulation No. PER-16/PJ/2020 concerning the Processing of Requests for the Implementation of Mutual Agreement Procedure and the Implementation of Mutual Agreement Procedure (PER-16/2020).
 
This regulation has been issued to provide guidelines for the Directorate General of Taxes (DGT) in following up on requests for MAP implementation and establishing proper and timely MAP management. This policy has been effective as of 10 September 2021.
 
Five important points are outlined under SE-49/2021. First, procedures for the receipt of requests for MAP implementation, proposals for requests for MAP implementation, revocation of requests for MAP implementation, and proposals for the renewal of requests for MAP implementation.
 
Based on SE-49/2021, procedures for the receipt of MAP requests may be submitted by resident taxpayers (Wajib Pajak Dalam Negeri/WPDN), Indonesian citizens (Warga Negara Indonesia/WNI), and the competent authority of Tax Treaty (Perjanjian Penghindaran Pajak Berganda/P3B) partners. MAP requests may be submitted by WPDN in the event of tax treatment by the tax authorities of P3B partners that does not comply with the provisions of P3B.
 
On another note, requests for MAP implementation by WPDN may also be submitted in the event that tax treatment by the Director General of Taxes does not comply with the provisions of P3B. Requests for MAP implementation shall be submitted to the Director General of Taxes through the Tax Office (Kantor Pelayanan Pajak/KPP) where the taxpayer is registered.
 
Further, requests for MAP implementation by WNI and the competent authority of P3B partners shall be submitted to the Director General of Taxes through the Director of International Taxation (Perpajakan Internasional/PI). Requests for MAP implementation submitted by WPDN and WNI may be submitted in person, by post with proof of postage, through a forwarder company or certain channels stipulated by the Director General of Taxes.
 
Specifically for requests for MAP implementation submitted by the competent authority of P3B partners, DGT stipulates two specific channels, namely electronic mail via [email protected] or facsimile. The e-mail may also be used as a means of correspondence with the competent authority of P3B partners. The date on which a request letter for MAP implementation submitted by WNI or the competent authority of P3B partners is received is the date the letter is received in the event that it is delivered in person or the date of letter delivery in the event that it is delivered by post, forwarder company, email, or facsimile.
 
Moreover, requests for MAP implementation submitted by WPDN, WNI, or the competent authority of P3B partners may be revoked. Requests for MAP implementation are revoked directly, by post, forwarder company, or certain channels stipulated by the Director General of Taxes. Specifically for the revocation of requests for MAP implementation submitted by the competent authority of P3B partners, the DGT stipulates two specific channels, namely electronic mail via [email protected] or facsimile.
 
Next, in the event a MAP negotiation has been conducted for a request for MAP implementation but has not yet resulted in a mutual agreement, the request for MAP implementation may be renewed. The request for MAP implementation may be renewed insofar as the requirements outlined in Article 3 paragraph (2) of PER-16/2020 are met.
 
Proposals related to the renewal of requests for MAP implementation are submitted by the competent authority of P3B partners in writing to the Director General of Taxes through the Director of International Taxation. The proposed renewal of requests for MAP implementation may be submitted in person, by post with proof of postage, or in other manners through a forwarder or courier service company with proof of postage or certain channels stipulated by the Director General of Taxes as per developments in information technology.
 
Second, procedures for the verification on the fulfillment of requirements and conformity of the materials of requests for MAP implementation, the proposed requests for MAP implementation, and the proposed renewal of requests for MAP implementation. In this case, the Director of International Taxation issues a letter of assignment for the MAP review team to conduct a MAP review. The tasks to be carried out by the MAP review team include:
  1. verifying the fulfillment of requirements and the conformity of the materials of requests for MAP implementation, the proposed requests for MAP implementation, and the proposed renewal of requests for MAP implementation, and following up on the verification;
  2. compiling a MAP dispute matrix;
  3. establishing a draft negotiating position and/or scope of the agreement;
  4. holding discussions with the MAP discussion committee;
  5. drafting the position paper and/or amendments thereto;
  6. following up on discussion results of the MAP discussion committee on the proposed renewal of requests for MAP implementation;
  7. verifying the fulfillment of requirements for the revocation of requests for MAP implementation and following up on verification results;
  8. preparing a notification letter for the termination of MAP implementation;
  9. preparing MAP review working papers, MAP review report, MAP implementation evaluation report, and other reports pertaining to MAP implementation;
  10. preparing a written notification to the competent authority of P3B partners that the mutual agreement may or may not be implemented;
  11. preparing a Director General of Taxes decision letter concerning mutual agreement;
  12. archiving and administering copies of books, records, data, and information in connection with MAP implementation; and
  13. compiling documentation of MAP implementation activities.
Based on the issued assignment letter, the MAP review team verifies the completeness of the requirements and conformity of the materials as outlined under MoF Reg. 49/2019 and PER-16/2020. Procedures for the verification of the fulfillment of requirements and conformity of the materials of requests for MAP implementation, the proposed requests for MAP implementation, and the proposed renewal of requests for MAP implementation are listed in Appendix B.
 
Third, procedures for the preparation of MAP negotiation. Prior to the negotiation, the MAP review team prepares the MAP dispute matrix. With respect to the preparation of the MAP dispute matrix, the MAP review team may request data, information, and/or documents from the KPP, DGT regional office, or other work units. In preparing the MAP negotiations, the MAP review team may carry out the following activities:
  1. requesting information and/or evidence or information in the context of MAP negotiation;
  2. discussing and clarifying with functional tax auditors, account representatives, or other related parties within the DGT;
  3. discussing with the applicant, WPDN and/or other related parties;
  4. reviewing the fixed place of business of the applicant and/or related WPDN;
  5. requesting an exchange of tax information with P3B partners; and
  6. requesting to perform audits for other purposes.
Based on the dispute matrix and review results in the context of preparing the MAP negotiation, the MAP review team prepares draft MAP review working papers and draft MAP review reports. Next, the MAP review team drafts the negotiating position and scope of the agreement. The draft negotiating position and scope of agreement are prepared based on the concepts of MAP review working papers and draft MAP review reports or amendments thereto.
 
Fourth, procedures for the implementation of MAP negotiations. In the context of implementing MAP negotiations, the Director General of Taxes establishes a delegation of MAP negotiators. The delegation of MAP negotiators is tasked with submitting the position paper to the competent authority of the P3B partners, holding discussions, conducting negotiations, making decisions on matters for which requests for MAP implementation are submitted, and compiling the minutes of MAP negotiations.
 
On another note, the delegation of MAP negotiators is also tasked with drafting a mutual agreement paper in the event that the MAP negotiation results in a mutual agreement and submitting written notification of the results of the MAP negotiation to the Director General of Taxes. In addition to their duties, the delegation of MAP negotiators is authorized to change the negotiating position, approve and sign the minutes of MAP negotiations, approve and follow up on the mutual agreement paper, and agree on the temporary negotiating position.
 
Fifth, procedures for the revocation of requests for MAP implementation, termination of MAP negotiations, and follow-up to the decision letter of mutual agreement. In the event of revocation of requests for MAP implementation, the Director General of Taxes issues notification of revocation of requests for MAP implementation to the competent authority of P3B partners. Notification shall be given if the competent authority of P3B partners does not provide a written response within 8 months since the request for MAP implementation is submitted by the Director General of Taxes.
 
Upon the revocation of requests for MAP implementation, the MAP review team shall verify the fulfillment of the requirements for the revocation of requests for MAP implementation. Procedures for the revocation of requests for MAP implementation, termination of MAP negotiations, and follow-up to the decision letter of mutual agreement are outlined in Appendix E which constitutes an integral part of this regulation.