India's top law firms are witnessing a significant increase in mandates from multinational companies seeking to resolve cross-border tax disputes through the mutual agreement procedure (MAP), a treaty-based dispute resolution mechanism. According to reports from Mint, this shift reflects businesses increasingly turning away from lengthy litigation in favour of negotiated settlements. Unlike conventional litigation before tribunals and courts, the MAP process relies on negotiations between competent authorities of treaty partners, providing a more structured and outcome-oriented approach for resolving international tax disputes.
The Organisation for Economic Co-operation and Development's latest available data reveals growing use of the MAP route in India, with tax authorities resolving more cases than they received during the year. As reported by Mint, India closed 131 MAP cases while receiving 96 new applications, helping reduce the pending caseload to 386 cases. The previous year's numbers were not detailed, but transfer pricing disputes still accounted for most MAP matters. On average, MAP cases took about 46 months to conclude, which compares very favourably against the typical decade-long timeframe of tax cases that proceed from tax departments to tribunals and courts.
MAP, once largely used for transfer pricing disputes, is now increasingly being explored for issues such as permanent establishment, profit attribution, royalties, withholding tax, and treaty disputes. According to tax partners at law firms cited by Mint, technology, manufacturing, pharma, financial services, investment and consulting companies are among the key users of this mechanism. The treaty-based mechanism allows tax authorities of two countries to jointly resolve cross-border tax disputes and cases of double taxation, based on principles under the OECD Model Tax Convention.
Indian tax authorities have become increasingly open to MAP, with a dedicated foreign tax & tax research (FT&TR) division within the CBDT handling such matters. As reported by Mint, these are very senior tax officers with in-depth understanding of international tax and transfer pricing. Successful MAP resolutions have been achieved with companies from France, Germany and the UK, demonstrating the mechanism's effectiveness. A recent India-Denmark treaty dispute involving a manufacturing group facing transfer pricing adjustments on service-fee payments between Indian and Danish entities saw MAP application reduce adjustments by nearly one-third.
Country-wise data by the OECD shows that the US remains India's largest MAP partner, followed by the UK, Germany, Switzerland, Japan and Singapore. According to Mint reports, German industrial group Siemens confirmed it has used MAP in cross-border tax matters, with a spokesperson stating that MAPs are a very well-established and helpful instrument. The mechanism has gained prominence after reports of trading firm Jane Street exploring MAP under the India-Singapore tax treaty in connection with its ongoing tax dispute with Indian authorities over tax treatment of profits from trading Indian derivatives.
