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Mutual Agreement Procedure
A Mutual Agreement Procedure is a negotiation between the Japanese government and a foreign country
which has a tax treaty. Therefore, if there is a foreign related transaction between a foreign country
which has no tax treaty with Japan, no Mutual Agreement Procedure can take place. In that case, in order
to avoid double taxation, tax payers can request that the tax authority provide exemptions, request an
examination from the tax Administrative Protest Court, or exercise tax litigation. All three options
are costly (government and professional fees) and can take a lot of time. The result of the Mutual Agreement
Procedure is confidential. However, the result of a Tax Administrative Protest Court examination or tax
litigation would be public information. Considering the situation, taxpayers usually choose the Mutual
Agreement Procedure or concede to double taxation.
There are two types of Mutual Agreement Procedures. The first is to avoid double taxation.
The second is for an APA, Advance Pricing Arrangement. Recently, about 80% of Mutual Agreement
Procedures have been for APAs.
which has a tax treaty. Therefore, if there is a foreign related transaction between a foreign country
which has no tax treaty with Japan, no Mutual Agreement Procedure can take place. In that case, in order
to avoid double taxation, tax payers can request that the tax authority provide exemptions, request an
examination from the tax Administrative Protest Court, or exercise tax litigation. All three options
are costly (government and professional fees) and can take a lot of time. The result of the Mutual Agreement
Procedure is confidential. However, the result of a Tax Administrative Protest Court examination or tax
litigation would be public information. Considering the situation, taxpayers usually choose the Mutual
Agreement Procedure or concede to double taxation.
There are two types of Mutual Agreement Procedures. The first is to avoid double taxation.
The second is for an APA, Advance Pricing Arrangement. Recently, about 80% of Mutual Agreement
Procedures have been for APAs.