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Tax Connect Flash | Italy: Tax Authorities' guidelines on Mutual Agreement Procedure and Arbitration Convention


The disputes concerning the double taxation of MNE involve, on the one hand, the States and, on the other hand, the private entities.

The OECD has developed the Mutual Agreement Procedure (hereinafter “MAP”), a bilateral tax treaty mechanism aimed at reducing double taxation. A similar mechanism is also adopted in the context of the European Union by means of the 1990 EU Arbitration Convention (hereinafter “AC”).

In the last three years the Italian Revenue Agency has experienced a significant increase in the use of the MAP/AC. The Italian Revenue Agency has thus provided the guidelines by means of Circular Letter No. 21 of June 5, 2012 (hereinafter the “Circular letter”) on how the MAP/AC should be carried on.

We summarize here-below the main indications contained in the Circular letter.

Double taxation


The MAP applies, as rule, to any case of economic or juridical double taxation under a double tax treaty (hereinafter “DTT”). In the MAP the competent authorities endeavour to resolve difficulties or doubts arising as to the interpretation or application of the Convention.

EU Arbitration Convention

The AC applies only to cases of economic double taxation concerning transfer pricing. Under the AC the competent authorities are obliged to find a solution to relieve the MNE from the double taxation.

The competent authorities

Both in the MAP and the AC, the Italian competent authority is the Ministry of the Economy and Finance.

Submission terms


Differently from the OECD Model, most DTTs signed by Italy provide that the MAP request should be filed within two years from the “first notification” of the action resulting in taxation not in accordance the provisions of the convention.

The Circular letter clarifies that the “first notification” refers to the date of notification of the reimbursement denial (or the 90th day following the request for refund absent an explicit denial) or of the tax assessment. However, the Circular letter also highlights that the MAP request may be submitted prior to any notification.

EU Arbitration Convention

The term to start the MAP within the AC is three years instead of two years.

Relationship with internal dispute


The tax litigation before Italian judicial bodies can be started together with the MAP.

Two cases should be considered:

  • the MAP is concluded before the tax litigation is concluded. In order to make the MAP effective, the taxpayer must waive the claim before the Italian Court;
  • the tax litigation is concluded before the representatives of the governments of the contracting States settle the dispute under the MAP. In such a case the Italian competent authorities must notify the foreign competent authorities the decision taken by the Italian Court leaving to the latter whether or not to comply with it.

It is up to the taxpayer to ask for the suspension of the judicial procedure while the MAP is running. The suspension is not mandatory but is customarily given by the Courts.

EU Arbitration Convention

The arbitration phase is permitted only if the taxpayer has allowed the time provided for appeal to expire, or has withdrawn any such appeal before a decision has been delivered.

Collection of taxes


There are no specific remedies to suspend the collection of taxes beyond those ordinarily provided for in the law.

EU Arbitration Convention

Under the AC, the Revenue Agency is allowed to suspend the collection of tax under certain conditions.

The role of the taxpayer

Notwithstanding that the MAP/AC involve only the competent authorities of the Contracting States, the Circular letter highlights the importance of a bona fide cooperation of the taxpayer. In particular, in transfer pricing cases, the taxpayer is allowed to provide all the relevant information to defend his position.

Sub-titleThe arbitration clauses under DTTs

13 DTTs signed by Italy contain an arbitration clause. Such a clause represents an obligation for the competent authorities to reach an agreement to relieve the MNE from double taxation that is stronger than the one contained in the MAP and less strong that the one contained in the AC.

The “serious penalty” concept under the AC

The AC cannot be claimed in case the taxpayer is liable to serious penalties.

Under the Unilateral Declarations contained in the AC, the term “serious penalties” means, as far as Italy is concerned, “penalties laid down for illicit acts, within the meaning of the domestic law, constituting a tax offence”.

The Circular letter highlights that the reference to “serious penalties” should be intended referred to cases of fraud or to cases in which a specific aim of tax evasion exists.

How can we help

CMS has a litigation department specialized in supporting the defence of tax audits at all levels, including MAP/AC, the Italian Supreme Court and the European Court of Justice.


Vittoria Segre 
Associate – CMS Adonnino Ascoli & Cavasola Scamoni

Fabio Aramini 
Partner – CMS Adonnino Ascoli & Cavasola Scamoni


Vittoria Segre
Vittoria Segre