U.S. taxpayers beware:
Year-end competent authority deadlines looming

Transfer pricing continues to be one of the first priorities of tax authorities around the world, and one of the major tax risks for many multinationals. Recent transfer pricing examination initiatives by the U.S. Internal Revenue Service and foreign countries' tax authorities have resulted in many taxpayers receiving proposed adjustments regarding intercompany transactions. To preserve the taxpayer's right to request competent authority assistance to attempt to relieve the double taxation caused by these adjustments, the United States and other countries' competent authorities must be notified of proposed or potential adjustments within set deadlines, as provided for in the relevant income tax treaties.

In the case of an IRS-initiated adjustment, the foreign tax authority must be notified, and in the case of a foreign-initiated adjustment, the IRS must be notified. The contact persons listed on the left can assist you in preparing the required notifications. Failure to make the appropriate notifications can result in the IRS or foreign tax authority denying the taxpayer's request for competent authority relief to eliminate double taxation.

The tables below summarize the notification/action requirements and applicable time limitations for requesting competent authority relief between the United States and most of its treaty partners. Table A provides the notification deadlines that are counted from the end of the taxable year to which the adjustment relates. Table B provides the deadlines that are counted from the due date or the date of filing of the tax return. Table C provides the deadlines that are counted from the notification of action causing double taxation, generally the date of the proposed adjustment.

The notification/action deadlines presented in the tables below are of a general nature. Taxpayers should consult with their tax advisors to evaluate the relevant provisions of the applicable treaty and their specific application to the taxpayer's facts and circumstances.



Table A. Notification deadlines counted from the end of the taxable year to which the case relates

U.S. treaty partner       Time limit to notify             Tax year for which action should be
                                competent authorities                taken by 31 December 2009
Canada                             6 years                                            2003
Finland                              6 years                                            2003
Netherlands                       6 years                                            2003
Turkey                              5 years                                            2004




Table B. Taxpayer's Action Deadline Counted From the Tax Return Filing (Due) Date

U.S. treaty partner           Time limit to notify competent authorities
Mexico*                                                 4.5 years




Table C. Taxpayer's Action Deadline Counted From Notification of Action Causing Double Taxation

U.S. treaty partner                  Time limit to file competent authority request
Australia                                              3 years from notification
Belgium                                               3 years from notification
China                                                  3 years from notification
Czech Republic                                     3 years from notification
Estonia                                               3 years from notification
France                                                3 years from notification
Germany                                             4 years from notification
India                                                  3 years from notification
Indonesia                                           3 years from notification
Japan                                                 3 years from notification
Latvia                                                 3 years from notification
Lithuania                                             3 years from notification
New Zealand                                       3 years from notification
Portugal                                              5 years from notification
Slovakia                                              3 years from notification
Slovenia                                             5 years from notification
South Africa**                                    3 years from notification
Spain                                                 5 years from notification
Thailand                                             3 years from notification
United Kingdom                                  3 years from notification, or if later, 6 years from the end of the taxable year in respect of which the taxation is imposed or proposed


* Taxpayer should notify the competent authority within 4.5 years from the due date or the date of filing of the return, whichever is later. Any agreement reached shall be implemented within ten years from the due date or the date of filing of the return, whichever is later, or a longer period if permitted by the domestic law of the respective country.

** From the first notification of the action resulting in double taxation (or in the case of tax collected at source within three years from the date of collection).