Resolution of double taxation disputes in the European Union
On October 10th, the Council adopted new rules to better resolve tax disputes. These new rules will ensure that businesses and citizens can resolve disputes related to the interpretation of tax treaties more swiftly and effectively.
The new rules will also cover issues related to double taxation which occurs when two or more countries claim the right to tax the same income or profits of a company or person. This can happen, for example, due to a mismatch in national rules or different interpretations of a bilateral tax treaty with regards transfer pricing arrangements.
Estimates show that there are currently around 900 double taxation disputes in the EU today, estimated to be worth €10.5 billion.
As such, taxpayers will have much more certainty when it comes to seeking resolution to their interpretation of tax treaties or double taxation problems. In particular, a wider range of cases will be covered and Member States will now have clear deadlines to agree on a binding solution, giving citizens and companies more timely decisions.
- Member States will now have a legal duty to take conclusive and enforceable decisions under the improved dispute resolution mechanism. If not, the national courts will do this for them.
- The agreement will ensure that taxpayers faced with tax treaty disputes can initiate a procedure whereby the Member States in question must try to resolve the dispute amicably within two years.
- If at the end of this period, no solution has been found, the Member States must set up an Advisory Commission to arbitrate.
- If Member States fail to do this, the taxpayer can bring an action before the national court to do so.
According to the new set of rules, the Advisory Commission will be comprised of 3 independent members and representatives of the competent authorities in question. It will have 6 months to deliver a final, binding decision. This decision will be immediately enforceable and must resolve the dispute.
What are the key aspects of the new rules?
For further information
- Read the October 10 Press Release
- Action Plan for a Fair and Efficient Corporate Tax System in the EU
- Proposal for a Council Directive on Double Taxation Dispute Resolution Mechanisms in the EU - Annex
- Press release on the "October package" - Q&A (MEMO)
- Impact Assessment - Summary