Arcotia Hatsidimitris - International Tax Dialogue

54 – 6. REACHING A DECISION POINT
Box 13. IRS Statement of Procedural Rules for Appeals
Appeals will ordinarily give consideration to an offer to settle a tax controversy on a basis which fairly
reflects the relative merits of the opposing views in the light of the hazards which would exist if the case were
litigated … [a fair and impartial resolution is one that] reflects on an issue-by-issue basis the probable result
in the event of litigation, or one that reflects mutual concessions for the purpose of settlement based on the
relative strength of the opposing positions where there is a substantial uncertainty of the result in the event of
litigation.
Not every case referred to Appeals can be settled. For example, settlement is not permitted unless
the taxpayer is able to demonstrate there is real uncertainty in law or fact or both as to the correct
application of the relevant law to the case. Appeals focus on the evidence available in a case and have
to assess the law that applies to an issue. They must consider any settlement proposal demonstrating a
good faith attempt to resolve the case.
Where there is a dispute between the business and the National Tax Administration (NTA) in
Japan there is a clear process which allows for a review of the assessment, both at examiner level and
subsequently by the National Tax Tribunal, before an appeal goes to formal litigation as explained in
Box 14.
Box 14. Japan – NTA: Reinvestigation and Reconsideration before Litigation
When the tax authorities (i.e. District Director, Regional Commissioner of the Regional Taxation Bureau)
do a disposition for taxation and taxpayers object to that disposition, taxpayers can use the following remedy
during a certain period. There is no procedure in Japan such as negotiated resolution between tax authority
and taxpayers.
Request for reinvestigation
A request for reinvestigation is the first stage in administrative appeal with regard to national taxes. In
cases where tax authorities took action for a correction, determination or seizure, with which taxpayers are
dissatisfied, taxpayers can request the tax authorities to revoke or change the ruling, within two months from
the date when the decision by tax authorities was made.
Request for reconsideration
Taxpayers, who remain dissatisfied with the decision made following the request for reinvestigation
above, are entitled to file a request for reconsideration to the Director-General of the National Tax Tribunal,
within 1 month from the date when the decision of reinvestigation was made.
Litigation
Taxpayers, who remain dissatisfied with the decision by the Director-General of the National Tax
Tribunal, are entitled to file litigation with the judiciary seeking a legal remedy, within six months of the date
when the decision by the Director- General of the National Tax Tribunal was made.
Settling disputes by litigation
The costs of litigating a transfer pricing case can quickly become out of proportion to the tax in
dispute and even where that is not so they can still be huge.
DEALING EFFECTIVELY WITH THE CHALLENGES OF TRANSFER PRICING © OECD 2012