As from June 2019, new EU rules come into force to ensure that businesses and citizens can resolve disputes related to the interpretation of tax treaties more swiftly and effectively between the Member States, making daily life easier and offering much more tax certainty for businesses and individuals experiencing double taxation issues.
Resolution of tax disputes in the European Union
The new rules will 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 2000 disputes pending in the EU, out of which around 900 are over 2 years old and 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 the EU Member States will now have clear deadlines to agree on a binding solution, giving citizens and companies more timely decisions.
The key aspects of the new rules
The new rules that applied can help member states to have a legal duty to take conclusive decisions of these problems:
- Taxpayers facing tax disputes that arise from bilateral tax agreements or conventions that provide for the elimination of double taxation can now initiate a mutual agreement procedure whereby the Member States in question must try to resolve the dispute amicably within two years.
- If no solution has been found at the end of this 2-year period, the taxpayer can request the setting up of an Advisory Commission to deliver an opinion. If Member States fail to do this, the taxpayer can bring an action before its national court and force Member States to act.
- This Advisory Commission will be comprised of three independent members appointed by the Member States concerned and representatives of the competent authorities in question. It must deliver an opinion within 6 months, which the Member States concerned must carry out unless they agree to another solution within the 6 months following the opinion.
- If the decision is not implemented, the taxpayer who has accepted the final decision and renounced his right to domestic remedies within 60 days from notification may seek to enforce its implementation before national court. Member States are obliged to notify taxpayers and publish the full final decision or an abstract.
Source: European Commission