Part II. Treaties and Tax Legislation

Subpart A.—Tax Conventions and Other Related Items

German Arbitration Memorandum of Understanding Announcement

Announcement 2008–124

On December 8, 2008, the Competent Authorities of the United States and Germany entered into a Memorandum of Understanding (MOU) regarding the arbitration process set forth in the United States

• Germany Income Tax Convention as amended by the Protocol signed on June 1, 2006. The MOU establishes principles and guidelines for the arbitration process.

Memorandum of Understanding Between The Competent Authorities of The Federal Republic of Germany And The United States of America

Introduction

The competent authorities of the Federal Republic of Germany and of the United States of America hereby enter into the following agreement (“the Agreement”) regarding the application of the arbitration procedure under paragraph 5 and 6 of Article 25 (Mutual Agreement Procedure) of the Convention Between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and to certain other Taxes signed on 29 August 1989 as amended by the Protocol signed on 1 June 2006 (“the Convention”). The Agreement is entered into under paragraph 22(q) of the Protocol to the Convention (“the Protocol”). The purpose of this Agreement is to provide guidance under which the U.S.-German arbitration procedure will operate.

1. Competent Authority Assistance in General a. A request for competent authority assistance must comply with the requirements as set out for the United States in Revenue Procedures 2006–54 and 2006–9, or subsequent guidance, and for

Germany in the Ministry of Finance circular of 13 July 2006 (IV B 6 — S 1300 — 340/06), or subsequent guidance. b. Taxpayers shall submit their requests for competent authority assistance to the Contracting State of which the person is a resident. In situations involving allocation of income or deductions between related persons, each person will send its request to the Contracting State of which it is a resident. 2. Cases eligible for arbitration a. According to paragraph 5 of Article 25 of the Convention, arbitration is available in respect of any case where the competent authorities have endeavored but are unable to reach an agreement under Article 25 regarding the application of those Articles of the Convention that are specified under paragraph 22 sentence 1 of the Protocol. b. An unresolved competent authority request which originated with a bilateral advance pricing agreement (APA) request is eligible for arbitration procedures. For procedures regarding APAs, see paragraph 20 below. c. Once a case is accepted into the mutual agreement procedure, neither competent authority will cease unilaterally to consider a case, except for the circumstances described in paragraph 3. 3. Cases ineligible for arbitration a. Arbitration is not available for cases which a competent authority has not accepted, or in which a competent authority ceases to provide assistance, in accordance with the Convention, the Protocol or published guidance. i. The German competent authority will generally not accept a request for competent authority assistance or will generally cease providing assistance to a taxpayer, and thus not provide for arbitration if the taxpayer

does not comply with the requirements or under circumstances as described in the Federal Ministry of Finance’s circular of 13 July 2006 - IV B 6 - S 1300 340/06 - (or any applicable subsequent guidance). Such requirements and circumstances are described in particular in circumstances described in sections 3.2.1., 3.3.1 and 5 of the circular. ii. The U.S. competent authority generally will not accept a request for competent authority assistance or will cease providing assistance to a taxpayer, and thus not provide for arbitration in the circumstances described in section 12.02 (Denial of Assistance) of Revenue Procedure 2006–54 (or any applicable subsequent guidance). In addition, the U.S. competent authority will not provide for arbitration for a case in which the taxpayer has reached a settlement on the issue with IRS Appeals (including an Appeals settlement through the Appeals arbitration process) or with Chief Counsel pursuant to an executed closing agreement or other written agreement such as Form 870–AD. b. Arbitration is not available for cases that have been accepted for competent authority consideration, but for which the competent authorities agree that the particular case is not suitable for determination by arbitration pursuant to paragraph 5(b)(aa)(B) of Article 25 of the Convention. This agreement may, depending on the circumstances of the particular case, be either a final decision, or a temporary deferral as is contemplated in paragraph 5.a.i below. The competent authorities will consider such agreement, for

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date on which the arbitration proceedings begin. (See paragraph 22(e) of the Protocol.) b. If either competent authority fails to appoint a member, the appointed board member shall contact the competent authority that appointed him or her. That competent authority shall contact the highest-ranking member of the Secretariat at the Centre for Tax Policy and Administration of the Organization for Economic Co-operation and Development (OECD) who is not a citizen of either Germany or the United States, who shall appoint a board member by written notice to both countries within 60 days of the date of such failure. (See paragraph 22(e) of the Protocol.) c. If the board members appointed by the competent authorities fail to agree upon the third member, the appointed board member(s) will contact their appointing competent authority(ies) and the necessary appointments will be made by the highest-ranking member of the Secretariat at the Centre for Tax Policy and Administration of the Organization for Economic Co-operation and Development (OECD) who is not a citizen of either Germany or the United States, by written notice to both countries within 60 days of the date of such failure. (See paragraph 22(e) of the Protocol.) d. The competent authorities will not appoint current government employees, or former government employees, within two years of their last employment in the government. e. The competent authorities will appoint members who have significant international tax experience. They need not, however, have experience as either a judge or arbitrator. Every member of an arbitration board shall be impartial and independent of the contracting states and the Concerned Persons at the time of accepting an appointment to serve, and shall remain so during the

instance, in the following scenarios: i. There is an inordinate and/or repeated delay in the response of a taxpayer to a request for information; or ii. In the event the taxpayer dockets the case for which it requested competent authority assistance for litigation, the case will be considered as not suitable for arbitration if the court does not allow for suspension of the litigation proceedings until such a time as a competent authority resolution has been reached. iii. A temporary deferral of arbi tration proceedings may also be considered in the case of an administrative appeal if the appeals proceedings have not been suspended. 4. Commencement Date a. Within 45 days of receipt of a MAP request for assistance each competent authority will review the request and verify whether it contains the information necessary to undertake substantive consideration for a mutual agreement, pursuant to paragraph 6(b) of Article 25 of the Convention and paragraph 22(p) of the Protocol. b. If a competent authority determines that the request for assistance is not complete, that competent authority will inform the taxpayer in writing within 45 days of receipt of the request, what information is necessary consistent with Rev. Proc. 2006–54 (or subsequent guidance) or the information required under the section 2.3.3 and 11.3.2 of the Federal Ministry of Finance circular of 13 July 2006 (or subsequent guidance). c. Once complete information is provided, pursuant to paragraph 22(p) of the Protocol, each competent authority will inform the other competent authority of the date it received the information necessary to undertake substantive consideration for a mutual agreement. The latter of these

dates will be the Commencement Date. (See paragraph 6(b) of Article 25 of the Convention.) d. Simultaneously, the competent authorities will confirm with each other that each has received the same information. e. When the Commencement Date is established, i. the competent authorities will exchange correspondence with each other confirming the Commencement Date and the date the arbitration proceedings potentially shall begin for any subsequently necessary arbitration, and ii. each competent authority will inform the concerned persons resident in its territory in writing of the Commencement Date and the date the arbitration proceedings potentially shall begin for any subsequently necessary arbitration. 5. Date Arbitration Proceedings Begin a. Arbitration proceedings in a case shall begin on the later of: i. Two years after the Commencement Date of that case, unless both competent authorities have agreed prior to the date arbitration proceedings begin to a different date, and ii. The earliest date upon which the nondisclosure agreements have been received by both competent authorities. (See paragraph 6 of Article 25 of the Convention.) b. If the competent authorities agree to begin arbitration proceedings on a date different from that generally required, then the competent authorities will confirm that date in writing to each other and to the concerned persons resident in their territory. 6. Board member appointment a. Each competent authority will appoint a member to the arbitration board by sending a written communication indicating their appointment to the other competent authority within 60 days of the

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made available for the competent authorities to use in negotiation. g. The competent authorities will send to the Chair four copies of each document submitted to the board, for distribution to the board members and other competent authority. 10. Requests for Additional Information a. Additional information may be submitted to the board only at its request, and copies of the board’s request and the competent authority’s response shall be provided to the other competent authority on the date on which the request or the response is submitted. (See paragraph 22(g) of the Protocol.) b. The board may request additional information that consists only of existing documents and may not request new or additional analyses. c. The board may establish a deadline for responding to the request. 11. Multiple Issues a. A case may consist of multiple issues. The existence of multiple issues in a case will ordinarily be identified by the assertion of multiple discrete proposed adjustments arising from an audit (or if there is no adjustment, multiple discrete denied credits or claims). The Proposed Resolution and Position Paper should address each issue separately. However, in an appropriate case, the competent authorities may agree to a different presentation of issues to the board, for example, where interrelated adjustments have been proposed. b. The board will make a determination on each issue separately. Thus, the final decision of the board may be comprised of portions of each of the Proposed Resolutions submitted by the competent authorities. 12. Permanent Establishment Cases a. Each competent authority is allowed to submit a Proposed Resolution and Position Paper that takes alternative positions. Thus, a competent authority may take the position that no permanent establishment exists. However, the

entire arbitration proceeding and for a reasonable time thereafter. f. If a board member is unable to fulfill his or her duties the chair will notify the competent authorities. The competent authority that selected the board member who is unable to fulfill his or her duties will select a substitute board member within 14 days. g. If any board member is unable to fulfill his or her duties the competent authorities will consult with the remaining board members to determine whether a new timetable is necessary. 7. Nondisclosure Issues a. Each concerned person and their authorized representatives or agents must agree prior to the beginning of arbitration proceedings not to disclose to any other person any information received during the course of the arbitration proceeding from either competent authority or the arbitration board, other than the determination of the board. (See paragraph 22(d) of the Protocol.) 8. List of Chairs a. The competent authorities will identify and jointly agree to 5 — 10 persons who are qualified and willing to serve as a Chair for an arbitration board. b. The competent authorities will review or revise this list every third year. c. Persons to be identified for this list will have significant international tax experience. They need not, however, have experience as either a judge or arbitrator. Consistent with paragraph 6(e), the Chair shall be impartial and independent of the contracting states and the Concerned Persons at the time of accepting an appointment to serve, and shall remain so during the entire arbitration proceeding and for a reasonable time thereafter. 9. Proposed Resolution, Position Papers and Reply Submissions a. Each competent authority will be permitted to submit, within 90 days of the appointment of the Chair of the arbitration board, a

Proposed Resolution paper, not to exceed five pages, describing the proposed disposition of the specific monetary amounts of income, expense or taxation at issue in the case, and a supporting Position Paper, not to exceed 30 pages, plus annexes, for consideration by the arbitration board. (See paragraph 22(g) of the Protocol.) b. The Proposed Resolution should be drafted in a form that provides a resolution for each specific amount of income, expense or tax at issue in the case. The Proposed Resolution may also address any related issues identified by a taxpayer’s request for competent authority assistance, that are required to be resolved to determine the specific amount of income, expense or tax, for example, the threshold existence of a permanent establishment (see paragraph 13 below). Thus, as may be appropriate in a particular case, the competent authorities may agree that a Proposed Resolution (or portion thereof) need not be “an amount of income, expense or tax”. c. In the event that only one competent authority submits a Proposed Resolution within the allotted time, then that Proposed Resolution shall be deemed to be the determination of the board in that case and the Proceeding shall be terminated. (See paragraph 22(g) of the Protocol.) d. Each competent authority may, if it so desires, submit a Reply Submission, not to exceed 10 pages, to the board within 180 days of the appointment of the Chair, to address any points raised by the Proposed Resolution or Position Paper submitted by the other competent authority. (See paragraph 22(g) of the Protocol.) e. In a particular case, the competent authorities may agree on different page limitations for the Proposed Resolutions, Position Papers or Reply Submissions. f. Any annex to a Position Paper must be a document previously

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the determination is considered rejected. c. If any concerned person fails to advise the competent authority within that period of time, the determination will be considered not to have been accepted and the case will be closed. d. The treatment of any interest or penalties will be determined by applicable domestic law of Germany or the United States. 18. Terminating Proceedings a. If a taxpayer terminates an arbitration proceeding by withdrawing its request for assistance, then the competent authorities will exchange letters to close the case. b. If a taxpayer terminates an arbitration proceeding by withdrawing its request for assistance, the Taxpayer will not ordinarily be allowed access to the competent authority procedures for the same matter and same years. 19. Arbitration and requests for Advance Pricing Agreements (APAs) a. Where the competent authorities have endeavored but are unable to reach an agreement in a case initially submitted to the competent authorities as a bilateral advance pricing agreement (APA) request this case is eligible for arbitration procedures, but only to the extent tax returns have been filed with respect to all taxable years at issue, including any years for which the taxpayer has requested a rollback, provided that the tax returns for the APA years (not including any rollback years) have been filed in accordance with the APA request. b. For purposes of establishing a Commencement Date for a case initially submitted as a request for an APA, paragraph 22(p) of the Protocol provides that the information necessary to undertake substantive consideration for a mutual agreement in the United States is the information required to be submitted to the Internal Revenue Service under Revenue Procedure 2006–9, section 4 (or any applicable subsequent guidance). In Germany, the infor

competent authority may propose an amount of income to be allocated to a permanent establishment, if the board determines that a permanent establishment exists. 13. Competent Authority Initiating the Mutual Agreement Procedure a. For requests for competent authority assistance concerning an adjustment raised in either Germany or the United States, the competent authority of the country that proposed the adjustment (or in the case where there is no adjustment, denied the credit or claim) is considered the competent authority initiating the Mutual Agreement Procedure. b. Meeting facilities, related resources, financial management, other logistical support, and general administrative coordination of the Proceeding will be provided, at its own cost, by the competent authority that initiated the Mutual Agreement Procedure. (See paragraph 22(l) of the Protocol.) 14. Nondisclosure a. Pursuant to paragraph 22(n) of the Protocol, upon confirmation of appointment of the arbitration board, each board member must agree in a statement to abide by and be subject to the confidentiality and nondisclosure provisions of Article 26 of the Convention and the applicable domestic laws of the Contracting States, as well as to this Agreement and the Arbitration Board Operation Guidelines. 15. Communication between the Board and the Competent Authorities a. Before the chair is appointed, the competent authorities will send any correspondence concurrently to both board members. b. After the chair is appointed, the competent authorities will send any correspondence to the chair. Similarly, the chair will send any correspondence concurrently to the competent authorities. c. No competent authority will have any ex parte communications, except for administrative or logistical matters, with a board member.

d. All communication, except for logistical matters, between the competent authorities and the board must be in writing. Written communication by fax or email is allowed, however, no information that may identify the taxpayer(s) may be included in an email. Express mail or air mail shall be used for all correspondence other than that sent via facsimile or email. 16. Fees and Expenses a. The fees and expenses will be borne equally by the competent authorities. (See paragraph 22(o) of the Protocol.) b. Neither competent authority will charge a taxpayer for costs associated with arbitration. c. The fees of members of the arbitration board will be set at the fixed amount of $2000 (two thousand United States dollars) or the equivalent in euro per day, subject to modification by the competent authorities. (See paragraph 22(o) of the Protocol.) d. In general, each board member will be compensated for no more than three days of preparation, two meeting days and for travel days. e. In general, the expenses of members of the arbitration board will be set in accordance with the International Centre for Settlement of Investment Disputes Schedule of Fees for arbitrators. (See paragraph 22(o) of the Protocol.) 17. Board Determination a. The determination of the board shall constitute a resolution by mutual agreement under Article 25 (Mutual Agreement Procedure) of the Convention and shall be binding on both competent authorities with respect to that case. b. Within 30 days of receiving the determination each concerned person(s) must accept the determination in writing sent to the competent authority of the Contracting State of which the concerned person is a resident. If the concerned persons fail to accept the determination within 30 days,

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d. For requests originally submitted as an APA, the competent authority of the country in which the parent company is located is considered the competent authority initiating the Mutual Agreement Procedure. If the parent company is a resident of a 3 ^rd state, the competent authorities will determine the competent authority serving as the one initiating the MAP. e. The provisions of paragraphs 1 through 18 apply as appropriate.

mation is that which would be required under the Ministry of Finance circular of 5 October 2006–IV B 4–S 1341–38/06–in connection with the 13 July 2006 circular (or any applicable subsequent guidance). c. Once complete information is provided, the Commencement Date of the case, for purposes of any subsequently necessary arbitration, will be the earlier of i) the date on which the competent authorities have exchanged position papers setting forth their

Agreed:

initial negotiating positions, or ii) two years from the earliest date on which the information necessary to undertake substantive consideration for a mutual agreement has been received by both competent authorities. However, the arbitration proceedings will in no event commence before one year after the submission of the tax return for the later of the corresponding tax years covered by the APA request (including any amendments) has elapsed.

For the Federal Republic of Germany For the United States of America

Jörg Kraeusel Deputy Director (International)

Barry B. Shott Deputy Commissioner (International) Large and Mid-sized Business Division

Date: Date:

the list, however, the board members should inform the competent authorities, in writing, prior to making the appointment. If they select a person not on the list, the person need not have arbitration experience; however, he or she should have significant familiarity with international tax issues. 2. Non-disclosure Pursuant to paragraph 22(n) of the Protocol, upon confirmation of appointment of the arbitration board, each board member must agree in a statement to abide by and be subject to the confidentiality and nondisclosure provisions of Article 26 of the Convention and the applicable domestic laws of the Contracting States, as well as to the Memorandum of Understanding and these guidelines. 3. Installation of Board a. When the chair accepts his or her appointment, the chair shall write to both competent authorities to inform them of his or her acceptance, providing the non-disclosure agreements, and indicating the date of appointment and provide the chair’s contact information.

The principal author of this announcement is Ana C. Guzman of the Office of Associate Chief Counsel (International). For further information regarding this announcement, contact Ms. Guzman at (202) 622–3880 (not a toll-free call).

German Arbitration Guidelines Announcement

Announcement 2008–125

The Deputy Commissioner (International), LMSB has developed guidelines regarding the arbitration process set forth in the United States - Germany Income Tax Convention as amended by the Protocol signed on June 1, 2006. These guidelines relate to the Memorandum of Understanding Between the Competent Authorities of the Federal Republic of Germany and the United States of America signed on December 8th, 2008 (See Ann. 2008–124, 2008–52 I.R.B. 1359). The guidelines apply to the arbitration process and, specifically, to the operations of the arbitration board.

Arbitration Board Operating Guidelines

1. Chair appointment a. Within 5 business days after the appointment of the second board member by a competent authority, the board members shall contact each other to discuss appointment of a third board member, who will serve as chair. b. Within 60 calendar days after the appointment of the second board member by a competent authority, the two board members shall appoint a third member, who will serve as a chair. (See paragraph 22(e) of the Protocol.) c. The competent authorities will provide to their appointed board members a list of persons who the competent authorities have agreed may potentially serve as chair of the board. The competent authorities encourage the board members to select a person from the list, particularly because of issues regarding governmental contracting. d. The two board members selected by the competent authorities may select as a chair a person not on

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of the request to the other competent authority. c. The board shall send a copy of a competent authority’s response to the other competent authority. 9. Board meetings a. The competent authorities encourage the members to use teleand videoconferencing. If a face-to-face meeting is necessary, the chair will contact the competent authority of the country that initiated the mutual agreement proceeding and ask it to arrange facilities for the meeting. i. For requests for competent authority assistance concerning an adjustment raised in either Germany or the United States, the competent authority of the country that proposed the adjustment (or in the case where there is no adjustment, denied the credit or claim) is considered the competent authority initiating the Mutual Agreement Procedure. ii. For requests originally submitted as an APA, the competent authority of the country in which the parent company is located is considered the competent authority initiating the Mutual Agreement Procedure. If the parent company is a resident of a 3 ^rd state, the competent authorities will determine the competent authority serving as the one initiating the MAP. b. The competent authority will arrange meeting facilities in a location that minimizes the board’s travel time and expenses. Each competent authority may arrange a meeting in the other’s meeting facilities, as needed. 10. A board member’s use of staff a. The competent authorities anticipate that board members will be able to perform their duties without the use of additional staff. b. If a board member uses staff, that staff person must sign a non-disclosure agreement before performing any work on the matter.

4. Operating Procedures a. To the extent needed, the board may adopt any additional procedures necessary for the conduct of its business, provided that the procedures are not inconsistent with any provision of Article 25 of the Convention, the Protocol, or any other related agreement between Germany and the U.S. b. If the board adopts any additional procedures, the chair shall provide a written copy of them to the competent authorities.
5. Communication with the CAs a. Before the chair is appointed, the competent authorities will send any correspondence concurrently to both board members. b. After the chair is appointed, the competent authorities will send any correspondence to the chair. Similarly, the chair will send any correspondence concurrently to the competent authorities. c. No board member will have any ex parte communications, except for administrative or logistical matters, with one competent authority. d. All communication, except for logistical matters, between the board and the competent authorities must be in writing. Written communication by fax or email is allowed, however, no information that may identify the taxpayer(s) may be included in an email. Express mail or air mail shall be used for all correspondence other than that sent via facsimile or email. e. The board members may communicate by telephone, videoconference, fax or face-to-face meetings. Board members may communicate by email; however, they must not include any taxpayer information in the email. f. All three board members must be present during substantive discussions. g. No board member shall have communications regarding the issues or matters before the board with the taxpayers involved in the case or their representatives

during or subsequent to the arbitration process. 6. Position papers and supporting papers a. Within 90 days of the appointment of the chair, each competent authority shall submit four copies of the following documents to the board: i. A proposed resolution paper not to exceed 5 pages, and ii. A supporting position paper not to exceed 30 pages, plus annexes. b. The chair will send a copy of each competent authority’s proposed resolution and supporting position papers to the other competent authority within 5 days of receipt of the later submission by the board. c. In the event that only one competent authority submits a Proposed Resolution and supporting Position Paper within the allotted time, then that Proposed Resolution shall be deemed to be the determination of the board in that case and the Proceeding shall be terminated. 7. Reply Submissions a. Within 180 days of the appointment of the chair, each competent authority may submit four copies of a reply submission not to exceed 10 pages, to address any points raised by the proposed resolution or position paper submitted by the other competent authority. b. The chair will send a copy of each competent authority’s reply submission paper to the other competent authority within 5 days of receipt of the later reply by the board. 8. Requesting additional information a. The competent authorities may not submit to the board any additional information, unless the board so requests. (See paragraph 22(g) of the Protocol.) b. The board may request additional information only from either competent authority. Such a request shall be in writing and include a response deadline. On the date the board issues the request, the board shall send a copy

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authority. (See paragraph 22(h) of the Protocol.) b. The written determination shall include only one of the two proposed resolutions for the issue(s) presented to the Board except for in circumstances described in paragraph 11 of the Memorandum of Understanding. c. The board will not determine the treatment of any associated interest or penalties; rather that treatment will be determined by applicable domestic law of Germany and the United States, as the case may be. (See paragraph 22(m) of the Protocol.) d. The written determination shall not include any rationale or analysis. (See paragraph 22(j) of the Protocol.) e. The determination of the board will have no precedential value. (See paragraph 22(j) of the Protocol.) f. No information relating to the Proceeding (including the board’s determination) may be disclosed by the members of the arbitration board or their staffs or by either competent authority, except as permitted by the Convention and the domestic laws of Germany or the United States. (See paragraph 22(n) of the Protocol.) 17. Terminating a Proceeding a. A Proceeding may be terminated by the board’s determination in the matter, by the competent authorities reaching a mutual agreement, or by a taxpayer’s withdrawal of its competent authority request. b. If a taxpayer withdraws its competent authority request, the competent authorities will notify the board that the taxpayer has withdrawn its request and the arbitration process is terminated. c. If the competent authorities wish to terminate a proceeding (for example, because they have reached an agreement on the treatment of the case), the competent authorities will notify the board that they have reached a mutual agreement

c. The board member must send the non-disclosure agreement to the competent authorities. d. The staff person must be subject to the same conflict of interest rules as the board member. e. The competent authorities will not compensate the staff member. 11. Payment of board members a. The expenses of members of the board shall be set in accordance with the International Centre for Settlement of Investment Disputes (ICSID) Schedule of Fees for arbitrators, as in effect on the date on which the arbitration proceedings begin. (See paragraph 22(o) of the Protocol.). This applies in particular for hotel, meals and incidental costs. With regard to travel expenses, board members will be reimbursed for economy class travel. b. With respect to fees, each board member will be compensated for no more than three days of preparation, for two meeting days and for travel days. c. If the board members feel they require additional time to properly consider the case, the Chair will contact the competent authorities to request additional time. 12. Inability of a board member to fulfill duties a. If the chair is unable to fulfill his or her duties, the remaining two board members will jointly inform both competent authorities and select a new chair within 14 days. b. If one of the other board members is unable to fulfill his or her duties, the chair will notify the competent authorities. The competent authority that selected the board member who is unable to fulfill his or her duties will select a substitute board member within 14 days. c. If any board member is unable to fulfill his or her duties the competent authorities will consult with the remaining board members to determine a new timetable, if necessary. d. Should it come to light that a board member has a conflict of

interest which would have prevented that member’s original appointment, the board member must recuse himself or herself from consideration of the case and inform the competent authorities. 13. Process for board’s determination a. The board must make a determination by adopting one of the proposed resolutions submitted by the competent authorities. b. For each issue, each board member must choose one of the proposed resolutions. c. A majority vote shall determine the decisions of the board in a case. 14. Multiple issue cases a. If a case contains more than one issue (for example, the case involves the transfer of tangible goods, the transfer of intangible goods and the performance of services) the board will make a determination on each issue individually. 15. Permanent establishment cases a. If the competent authorities have not reached an agreement on the existence of a permanent establishment, the board members must first determine whether a permanent establishment exists. b. Once it is determined that a permanent establishment exists, the board members must then determine the amount of profits attributable to that permanent establishment. Accordingly, the competent authorities may submit a position paper and supporting paper that take alternative positions. For example, a competent authority may take the position that a permanent establishment does not exist. That competent authority may also take the position that if the board determines that a permanent establishment exists, a certain amount of income should be allocated to that permanent establishment. 16. Board’s Determination a. Within 9 months of the appointment of the chair, the chair shall provide the written determination concurrently to each competent

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The principal author of this announcement is Ana C. Guzman of the Office of Associate Chief Counsel (International). For further information regarding this announcement, contact Ana C. Guzman at (202) 622–3880 (not a toll-free call).

and the arbitration process is terminated. d. At the termination of any proceeding each board member must immediately destroy all documents or other information received from either competent

authority, or otherwise reflecting the considerations or discussions of the arbitration board, and delete all information that may be stored on any computer, personal data assistant or other electronic device or media.

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