UK HMRC has launched a technical consultation on the Draft Double Taxation Dispute Resolution (EU) Regulations 2019. The Regulations are for the implementation of Council Directive on tax dispute resolution mechanisms in the European Union.
The UK plan to adopt dispute resolution which covers 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.
To be processed through dispute resolution, large undertakings and large corporate groups must submit a “complaint” to each member state involved in the dispute. Individuals and other business undertakings must submit their complaint only to their state of residence. The complaints need to be lodged 3 years beginning with the date on which the affected person receives the first notification of the action resulting in, or which will result in, the question in dispute. Competent authorities then have a further six months to decide whether to accept the complaint.
Where the Commissioners accept the complaint, the Commissioners may decide to resolve the question in dispute on a unilateral basis. As other options, if the commissioners are satisfied that each other competent authority concerned has accepted MAP should come into place. The competent authorities must endeavour to resolve the issue by mutual agreement within two years from the last notification of acceptance of the complaint.
Taxpayer may make a request to the Commissioners for an Advisory Commission to solve the dispute in case unilateral and mutual agreement procedure could not solve the dispute involve. In addition, a request may be made where some, but not all, competent authorities have refused the MAP request if taxpayers have no right of appeals to national courts on the refusal. An Alternative Dispute Resolution Commission may be established instead of an Advisory Commission. This may differ in composition and form from the Advisory Commission and may include last best offer arbitration. Although not explicit, it is apparent that the Advisory Commission will proceed by way of reasoned opinion.
Date of enforcement
The entry into force date of the regulation is not yet set. The regulations would have effect in relation to any income earned or capital gained in a tax year commencing on or after 1 January 2018.
Source: The British Government