COMMISSION OF THE EUROPEAN COMMUNITIES

 

 

 

Brussels, 23.04.2004

 

 

 

COM(2004) 297 final

 

 

 

COMMUNICATION FROM THE COMMISSION

 

TO THE COUNCIL, THE EUROPEAN PARLIAMENT AND

 

THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE

 

 

 

on the work of the EU Joint Transfer Pricing Forum in the field of business taxation

 

from October 2002 to December 2003 and on a proposal for a Code of Conduct for the

 

effective implementation of the Arbitration Convention (90/436/EEC of 23 July 1990)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


TABLE OF CONTENTS

 

 

 

INTRODUCTION

 

 

 

1.      Background

 

 

 

2.      Activities of the EU Joint Transfer Pricing Forum from October 2002 to December

 

2003

 

 

 

3.      Commission conclusions

 

 

 

ANNEX I:      ESTABLISHMENT OF THE JTPF

 

 

 

ANNEX II:    DRAFT CODE OF CONDUCT

 

 

 

ANNEX III:   REPORT ON THE ACTIVITIES OF THE EU JOINT TRANSFER PRICING

 

FORUM IN THE FIELD OF BUSINESS TAXATION OCTOBER 2002 –

 

DECEMBER 2003

 

 

 

1.      Summary of the proceedings of the meetings of the EU Joint Transfer Pricing Forum

 

 

 

2.      Conclusions and recommendations on issues related to the Arbitration Convention

 

and on certain related issues of mutual agreement procedures under double tax

 

treaties between Member States

 

 

 

3.      Other issues examined by the JTPF in relation to double taxation resulting from

 

transfer pricing adjustments

 

 

 

4.      Conclusions

 

 

 

ANNEX I::     MEMBER STATES' POSITION DURING THE INTERIM PERIOD

 

 

 

ANNEX II:    DRAFT CODE OF CONDUCT

 

 

 

Annex to the draft Code of Conduct

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTRODUCTION

 

 

 

1.      BACKGROUND

 

 

 

1.      The European Commission's Study “Company Taxation in the Internal Market"[1]

 

examined whether the current application of company taxation in the Internal Market

 

creates inefficiencies and prevents operators from exploiting its full benefits. It did so

 

in response to the mandate given to the Commission by the Council of Ministers in

 

July 1999 to investigate the impact of differentials in the effective level of corporate

 

taxation in Member States on the location of economic activity and investment and

 

the impact of tax provisions that constitute obstacles to cross-border economic

 

activities in the Internal Market and remedies thereto.

 

 

 

2.      This Study highlighted in detail (part III, chapter 5) the increasing importance of

 

transfer pricing tax problems as an Internal Market issue. The obstacles and problems

 

identified are varied in nature but all have become increasingly important in recent

 

years and call for action. The deepening of the Internal Market and the growing

 

number of new technologies and business structures at national and international

 

level has aggravated these problems over the last few years. There is convincing

 

evidence that applying transfer prices for tax purposes is complicated and often

 

problematic in practice. A common feature of many of the specific individual

 

problems is that closer co-operation between tax administrations and business could

 

lead to solutions. The Study considers the improvement of co-ordination between

 

Member States of major importance in the short term in order to reduce compliance

 

costs and lessen the uncertainty relating to transfer pricing.

 

 

 

3.      One of the possible methods of tackling the specific EU transfer pricing problems

 

mentioned in the Study, and proposed by the Commission in its Communication

 

“Towards an Internal Market without tax obstacles – A strategy for providing

 

companies with a consolidated corporate tax base for their EU-wide activities ”[2], was

 

the establishment of a “EU Joint Transfer Pricing Forum” (Hereafter: JTPF).

 

 

 

4.      Following the Council Conclusions of 11 March 2002 welcoming this initiative, the

 

Commission established the JTPF. Its members consist of an expert of each Member

 

State and 10 experts from business. Representatives from applicant countries and the

 

OECD-Secretariat attend as observers. Details on the procedure followed for the

 

selection of the Chairman and the JTPF Members are contained in Annex I of this

 

Communication. The proceedings of the JTPF are available on the Commission's

 

website.[3]

 

 


2.      ACTIVITIES OF THE EU JOINT TRANSFER PRICING FORUM FROM OCTOBER 2002 TO DECEMBER 2003

 

 

 

5.      The JTPF met for the first time on 3 October 2002 and established a two-year work

 

programme. An activity report of the JTPF, adopted by consensus and covering the

 

first element of the work programme, is annexed to the present Communication

 

(Annex III). The JTPF has so far mainly discussed the problems related to the

 

application of the Arbitration Convention[4]. It has examined problems that have

 

occurred in the last few years as a result of the fact that not all contracting states have

 

ratified the Accession Convention of the Republic of Austria, the Republic of

 

Finland and the Kingdom of Sweden (Accession Convention) and the Protocol

 

amending the original Convention (Prolongation Protocol). Furthermore, the JTPF

 

has looked for clear definitions of the starting point of the three year (notification)

 

and two-year (mutual agreement) periods enshrined in the first phase of the

 

arbitration procedure established under the Arbitration Convention. It has also

 

examined ways to improve the mutual agreement and arbitration phases and

 

addressed issues such as the interaction of the mutual agreement and arbitration

 

procedure with administrative and judicial appeals, the possibility of suspending tax

 

collection during cross border dispute resolution procedures, the accession of EU

 

Acceding States to the Arbitration Convention and the effect of interest charges and

 

penalties. The activity report summarises the deliberations of the JTPF. It concludes

 

by inviting the Commission to propose a Code of Conduct setting out detailed rules

 

to ensure the effective implementation of the Arbitration Convention (Convention

 

90/436/EEC of 23 July 1990 on the elimination of double taxation in connection with

 

the adjustment of profits of associated enterprises) and dealing with certain related

 

issues of the mutual agreement procedures under double tax treaties between

 

Member States. The report proposes that this Code could be adopted by the Council

 

in the format of a Resolution.

 

 

 

3.      COMMISSION CONCLUSIONS

 

 

 

6.      Considering the aforementioned activity report of the JTPF, the Commission can

 

only express its satisfaction with the work of the JTPF which has proved to be a

 

constructive tool to tackle the challenges posed by transfer pricing policies in the EU.

 

 

 

7.      The experts from the Member States and those from business have examined the

 

different issues at stake in an open and constructive manner that has lead to

 

pragmatic non-legislative proposals and recommendations for solutions.

 

 

 

8.      However, the Commission regrets that the JTPF had to spend much of its meeting

 

time on issues linked to the fact that the Prolongation Protocol to the Arbitration

 

Convention as well as the Accession Convention, signed in 1999 and 1995

 

respectively, have not yet been ratified by all Member States. Clearly this situation

 

would not have arisen had the Council followed the original Commission proposal of

 

adopting an instrument under Community law rather than a multilateral Convention.

 

 

 

 

 

9.         The specific problem of the accession of the EU Member States to the Arbitration

 

Convention (3.1 of the JTPF report) is of particular concern to the Commission. As

 

demonstrated by the previous enlargement of the EU, the time that the future 25 EU

 

Member States could take to ratify this instrument might seriously jeopardise its

 

added value for the new EU Member States and for corporate business as a whole in

 

that geographic area. Moreover the network of bilateral double tax treaties between

 

the new EU Member States themselves and between those States and the current

 

Member States is not complete, despite the efforts made to complete it. This

 

sometimes makes it impossible for business to request a mutual agreement procedure

 

so as to obtain relief from double taxation. The Commission therefore endorses fully

 

the recommendation of the JTPF that the Member States should commit to

 

ratification of an Accession Convention for the new EU Member States before the

 

end of the first half of 2006. Moreover, this Accession Convention should contain a

 

provision permitting immediate bilateral application between ratifying Member

 

States. The Commission is also in favour of including in the Arbitration Convention

 

itself a legal provision that would avoid a repeat of the time consuming ratification

 

process after each EU enlargement e.g by providing for automatic accession or

 

accession by unilateral declaration.

 

 

 

10.    The Commission looks forward to the Forum's work on the remainder of the work

 

programme adopted in 2002. In this context, the Commission would like to dispel

 

misunderstandings that may have arisen concerning the Forum's mandate to "identify

 

possible non-legislative improvements to … practical problems". The objective of

 

this element of the mandate was to avoid any prejudice to the respective

 

competencies of the EU institutions and the Member States and thus it concerns

 

Community legislation. This element of the mandate should not in any way be

 

considered to preclude the JTPF from identifying practical improvements that could

 

imply legislative changes in certain Member States. Since the JTPF is a purely

 

consultative expert group, the decision on any potential legislative changes would in

 

any event remain solely with the Member States concerned.

 

 

 

11.    Taking into account the remaining and important outstanding issues of the JTPF's

 

working programme adopted in 2002, the Commission intends to extend from June

 

2004 until the end of 2004 the initial period of two years foreseen for the activities of

 

the JTPF. Taking into account the overall results and further issues for discussion

 

identified and proposed by the JTPF, the Commission might decide on a further

 

extension of the JTPF mandate for another period of two years.

 

 

 

12.    Deliberations in the JTPF have highlighted the difficulties encountered in the

 

implementation of the Arbitration Convention. The conclusions and

 

recommendations proposed by the JTPF would resolve many of its shortcomings and

 

the Commission is of the opinion that their practical implementation could lead to

 

important progress in achieving a proper tool to remedy double taxation related to

 

transfer pricing in the E.U. In view of these considerations and in function of the

 

follow-up given to the present Commission proposal by the Council, the Commission

 

will assess the need for proposing an instrument of Community law at a later stage.

 

 

 

13.    As an intermediate solution however, the Commission fully supports the conclusions

 

and recommendations contained in the first activity report of the JTPF, and it

 

therefore invites the Council to adopt as soon as possible the proposal for a Code of

 

Conduct on the effective implementation of Convention 90/436/EEC of

 

23 July 1990, on the elimination of double taxation in connection with the

 

adjustment of profits of associated enterprises, as laid down in annex II of this

 

Communication.


ANNEX I: ESTABLISHMENT OF THE JTPF

 

 

 

Selection of Chair

 

 

 

The Council conclusions of 11 March 2002 stated that the Chair of the JTPF should

 

be an independent personality with long standing experience in the field of transfer

 

pricing who should be appointed by the Commission in agreement with a Selection

 

Board composed of high level representatives of the Council Presidency, the

 

Commission and the UNICE Tax Committee.

 

 

 

This Selection Board was composed of Mr. José Maria VALLEJO CHAMORRO,

 

Deputy Director General for International Tax Affairs, representing the Spanish

 

Presidency, Mr. Jan van der BIJL, Chairman of the UNICE Fiscal Affairs

 

Committee, and Mr. Michel AUJEAN, Director of the Directorate for Tax Policy of

 

the Commission's Directorate-General for Taxation and the Customs Union. The

 

selection board unanimously agreed on Mr. Bruno GIBERT, partner of CMS Bureau

 

Francis Lefebvre, as Chairman of the JTPF

 

 

 

Selection of business experts

 

 

 

Following the publication of the call for applications of interest for the establishment

 

of the JTPF in the OJ C 90 of 16 April 2002, the above selection board, referred to in

 

paragraph 1.2.1 §6, met on 28 June 2002 to consider the list of selected applications

 

for participation as business representatives. These members would act in their own

 

capacity and for a renewable period of two years.

 

 

 

The Commission received 60 applications of which six were received after the

 

deadline fixed in the call for applications.

 

 

 

Taking into account the criteria laid down in the call, (proven abilities and

 

experience in the field of transfer pricing, proven knowledge and experience with EU

 

Community legislation and internal market and taxation issues in particular) and the

 

need for a balanced composition in terms of geographical origin, size of business and

 

type of activity, the selection board decided to select the following applicants (in

 

alphabetical order:

 

 

 

Mr. Philip GILLET

 

Mr. Eduardo GRACIA

 

Mr. Guy KERSCH

 

Dr. Klaus KROPPEN

 

Prof. Gugliemo MAISTO

 

Dr. Ulrich MOEBUS

 

Mrs. Sylvie PUECH

 

Mr. Chris ROLFE

 

Mr. Theo SCHMIT

 

Prof. Dirk VAN STAPPEN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appointment of experts from Member States’ tax administrations

 

 

 

A letter inviting Member States to appoint an expert to participate in the JTPF was

 

sent out on 10 June 2002. All addressees replied positively and appointed an expert.

 

 

 

Appointment of observers from EU Candidate Member States’ tax

 

administrations and OECD

 

 

 

A letter inviting EU candidate countries and OECD to appoint an observer to the

 

JTPF was sent out on 10 June 2002. Except for Romania all addressees replied

 

positively and appointed an observer.

 

 


ANNEX II: DRAFT CODE OF CONDUCT

 

 

 

THE COUNCIL OF THE EUROPEAN UNION AND THE REPRESENTATIVES

 

OF THE GOVERNMENTS OF THE MEMBER STATES, MEETING WITHIN

 

THE COUNCIL,

 

 

 

HAVING REGARD TO Convention 90/436/EEC of 23 July 1990, on the

 

elimination of double taxation in connection with the adjustment of profits of

 

associated enterprises,

 

 

 

ACKNOWLEDGING the need both for Member States and taxpayers to have more

 

detailed rules to implement efficiently the aforementioned Convention,

 

NOTING the Commission communication on the report on the activities of the EU

 

Joint Transfer Pricing Forum in the field of business taxation of ……………2004,

 

 

 

EMPHASISING that the Code of Conduct is a political commitment and does not

 

affect the Member States' rights and obligations or the respective spheres of

 

competence of the Member States and the Community resulting from the Treaty,

 

 

 

ACKNOWLEDGING that the implementation of this Code of Conduct should not

 

hamper solutions at more global level,

 

 

 

HEREBY ADOPT THE FOLLOWING CODE OF CONDUCT:

 

 

 

Without prejudice to the respective spheres of competence of the Member States

 

and the Community, this Code of Conduct concerns the implementation of

 

Convention 90/436/EEC of 23 July 1990, on the elimination of double taxation

 

in connection with the adjustment of profits of associated enterprises and

 

certain related issues of the mutual agreement procedure under double tax

 

treaties between Member States.

 

 

 

1.      The starting point of the three-year period (deadline for submitting the

 

request according to Article 6 (1) of the Arbitration Convention

 

 

 

The date of the “first tax assessment notice or equivalent which results or is likely to

 

result in double taxation within the meaning of Article 1, e.g. due to a transfer

 

pricing adjustment” is considered as the starting point for the three-year period.

 

 

 

As far as transfer pricing cases are concerned, Member States are recommended to

 

apply this definition also to the determination of the three-year period as provided for

 

in Article 25 (1) of the OECD Model Tax Convention on Income and on Capital and

 

implemented in the double tax treaties between EU Member States.

 

 

 

 

 

2.      The starting point of the two-year period (Article 7 (1) of the Arbitration

 

Convention)

 

 

 

(i)      For the purpose of Article 7 (1) of the Convention, a case will be regarded as

 

having been submitted according to Article 6 (1) when the taxpayer provides

 

he following :

 

 

 

a)      identification (such as name, address, tax identification number) of the

 

enterprise of the Contracting State that presents its request and of the

 

other parties to the relevant transactions;

 

b)      details of the relevant facts and circumstances of the case (including

 

details of the relations between the enterprise and the other parties to the

 

relevant transactions);

 

c)      identification of the tax periods concerned;

 

d)      copies of the tax assessment notices, tax audit report or equivalent

 

leading to the alleged double taxation;

 

e)      details of any appeals and litigation procedures initiated by the enterprise

 

or the other parties to the relevant transactions and any court decisions

 

concerning the case;

 

f)      an explanation by the enterprise of why it thinks that the principles set

 

out in Article 4 of the Arbitration Convention have not been observed;

 

g)      an undertaking that the enterprise shall respond as completely and

 

quickly as possible to all reasonable and appropriate requests made by a

 

competent authority and have documentation at the disposal of the

 

competent authorities; and

 

h)      any specific additional information requested by the competent authority

 

within two months upon receipt of the taxpayer’s request.

 

 

 

(ii)     The two-year period starts on the latest of the following dates:

 

 

 

a)      the date of the tax assessment notice, i.e. a final decision of the tax

 

administration on the additional income, or equivalent;

 

b)      the date on which the competent authority receives the request and the

 

minimum information as stated under point 2 (i).

 

 

 

3.      Mutual agreement procedures under the Arbitration Convention

 

 

 

3.1    General provisions

 

 

 

a)      The arm’s length principle will be applied, as advocated by the OECD, without

 

regard to the immediate tax consequences for any particular Contracting State.

 

b)      Cases will be resolved as quickly as possible having regard to the complexity

 

of the issues in the particular case in question.

 

c)      Any appropriate means for reaching a mutual agreement as expeditiously as

 

possible, including face-to-face meetings, will be considered; where

 

appropriate, the enterprise will be invited to make a presentation to its

 

competent authority.

 

d)      Taking into account the provisions of this Code, a mutual agreement should be

 

reached within two years of the date on which the case was first submitted to

 

one of the competent authorities in accordance with point 2 (ii) of this Code.

 

e)      The mutual agreement procedure should not impose any inappropriate or

 

excessive compliance costs on the person requesting it, or on any other person

 

involved in the case.

 

 

 

3.2    Practical functioning and transparency

 

 

 

a)      In order to minimise costs and delays caused by translation, the mutual

 

agreement procedure, in particular the exchange of position papers, should be

 

conducted in a common working language, or in a manner having the same

 

effect, if the competent authorities can reach agreement on a bilateral basis.

 

b)      The enterprise requesting the mutual agreement procedure will be kept

 

informed by the competent authority to which it made the request of all

 

significant developments that affect it during the course of the procedure.

 

c)      The confidentiality of information relating to any person that is protected under

 

a bilateral tax convention or under the law of a Contracting State will be

 

ensured.

 

d)      The competent authority will acknowledge receipt of a taxpayer’s request to

 

initiate a mutual agreement procedure within one month from the receipt of the

 

request and at the same time inform the competent authorities of the other

 

Contracting States involved in the case attaching a copy of the taxpayer’s

 

request.

 

e)      If the competent authority believes that the enterprise has not submitted the

 

minimum information necessary for the initiation of a mutual agreement

 

procedure as stated under point 2 (i), it will invite the enterprise within two

 

months upon receipt of the request, to provide it with the specific additional

 

information it needs.

 

f)      Contracting States undertake that the competent authority will respond to the

 

enterprise making the request in one of the following forms:

 

 

 

(i)      if the competent authority does not believe that profits of the enterprise

 

are included, or are likely to be included, in the profits of an enterprise of

 

another Contracting State, it will inform the enterprise of its doubts and

 

invite it to make any further comments;

 

(ii)     if the request appears to the competent authority to be well-founded and

 

it can itself arrive at a satisfactory solution, it will inform the enterprise

 

accordingly and make as quickly as possible such adjustments or allow

 

such reliefs as are justified;

 

(iii)    if the request appears to the competent authority to be well-founded but it

 

is not itself able to arrive at a satisfactory solution, it will inform the

 

enterprise that it will endeavour to resolve the case by mutual agreement

 

with the competent authority of any other Contracting State concerned.

 

 

 

g)      If a competent authority considers a case to be well founded, it should initiate a

 

mutual agreement procedure by informing the competent authority of the other

 

Contracting State of its decision and attach a copy of the information as

 

specified under point 2 (i) of this Code. At the same time it will inform the

 

person invoking the Arbitration Convention that it has initiated the mutual

 

agreement procedure. The competent authority initiating the mutual agreement

 

procedure will also inform - on the basis of information available to it - the

 

competent authority of the other Contracting State and the person making the

 

request whether the case was presented within the time limits provided for in

 

Article 6 (1) of the Arbitration Convention and of the starting point for the twoyear

 

period of Article 7 (1) of the Arbitration Convention.

 

 

 

3.3    Exchange of position papers

 

 

 

a)      Contracting States undertake that when a mutual agreement procedure has been

 

initiated, the competent authority of the country in which a tax assessment, i.e.

 

a final decision of the tax administration on the income, or equivalent has been

 

made, or is intended to be made, which contains an adjustment that results, or

 

is likely to result, in double taxation within the meaning of Article 1 of the

 

Arbitration Convention, will send a position paper to the competent authorities

 

of the other Contracting States involved in the case setting out:

 

 

 

(i)      the case made by the person making the request;

 

(ii)     its view of the merits of the case, e.g. why it believes that double taxation

 

has occurred or is likely to occur;

 

(iii)    how the case might be resolved with a view to the elimination of double

 

taxation together with a full explanation of the proposal.

 

 

 

b)      The position paper will contain a full justification of the assessment or

 

adjustment and will be accompanied by basic documentation supporting the

 

competent authority’s position and a list of all other documents used for the

 

adjustment.

 

c)      The position paper will be sent to the competent authorities of the other

 

Contracting States involved in the case as quickly as possible taking account of

 

the complexity of the particular case and no later than four months from the

 

latest of the following dates:

 

 

 

i)       the date of the tax assessment notice, i.e. final decision of the tax

 

administration on the additional income, or equivalent;

 

ii)      the date on which the competent authority receives the request and the

 

minimum information as stated under point 2 (i).

 

 

 

d)      Contracting States undertake that, where a competent authority of a country in

 

which no tax assessment or equivalent has been made, or is not intended to be

 

made, which results, or is likely to result, in double taxation within the

 

meaning of Article 1 of the Arbitration Convention, e.g. due to a transfer

 

pricing adjustment, receives a position paper from another competent authority

 

it will respond as quickly as possible taking account of the complexity of the

 

particular case and no later than six months after receipt of the position paper.

 

e)      The response should take one of the following two forms:

 

 

 

(i)      if the competent authority believes that double taxation has occurred, or

 

is likely to occur, and agrees with the remedy proposed in the position

 

paper, it will inform the other competent authority accordingly and make

 

such adjustments or allow such relief as quickly as possible;

 

(ii)     if the competent authority does not believe that double taxation has

 

occurred, or is likely to occur, or does not agree with the remedy

 

proposed in the position paper, it will send a responding position paper to

 

the other competent authority setting out its reasons and proposing an

 

indicative time scale for dealing with the case taking into account its

 

complexity. The proposal will include, whenever appropriate, a date for a

 

face-to-face meeting, which should take place no later than 18 months

 

from the latest of the following dates:

 

 

 

aa)    the date of the tax assessment notice, i.e. final decision of the tax

 

administration on the additional income, or equivalent;

 

bb)    the date on which the competent authority receives the request and

 

the minimum information as stated under point 2 (i).

 

 

 

f)      Contracting States will further undertake any appropriate steps to speed up all

 

procedures wherever possible. In this respect, Contracting States should

 

envisage to organise regularly, and at least once a year, face-to-face-meetings

 

between their competent authorities to discuss pending mutual agreement

 

procedures (provided that the number of cases justifies such regular meetings).

 

 

 

3.4    Double tax treaties between Member States

 

 

 

As far as transfer pricing cases are concerned, Member States are recommended to

 

apply the provisions of points 1 to 3 also to mutual agreement procedures initiated in

 

accordance with Article 25 (1) of the OECD Model Convention on Income and on

 

Capital, implemented in the Double tax treaties between Member States.

 

 

 

4.      Proceedings during the second phase of the Arbitration Convention

 

 

 

4.1    List of independent persons

 

 

 

a)      Contracting States commit themselves to inform without any further delay the

 

Secretary General of the Council of the European Union of the names of the

 

five independent persons of standing, eligible to become a Member of the

 

advisory commission as referred to in Article 7 (1) of the Arbitration

 

Convention and inform, under the same conditions, of any alteration of the list.

 

b)      When transmitting the names of their independent persons of standing to the

 

Secretary General of the Council of the European Union, Contracting States

 

will join a curriculum vitae of those persons, which should, among other

 

things, describe their legal, tax and especially transfer pricing experience.

 

c)      Contracting States may also indicate on their list those independent persons of

 

standing who fulfil the requirements to be elected as Chairman.

 

d)      The Secretary General of the Council will address every year a request to

 

Contracting States to confirm the names of their independent persons of

 

standing and/or give the names of their replacements.

 

e)      The aggregate list of all independent persons of standing will be published on

 

the Council’s web-site.

 

 

 

4.2    Establishment of the advisory commission

 

 

 

a)      Unless otherwise agreed between the Contracting States concerned, the

 

Contracting State that issued the first tax assessment notice, i.e. final decision

 

of the tax administration on the additional income, or equivalent which results,

 

or is likely to result, in double taxation within the meaning of Article 1 of the

 

Arbitration Convention, takes the initiative for the establishment of the advisory

 

commission and arranges for its meetings, in agreement with the other

 

Contracting State.

 

b)      The advisory commission will normally consist of two independent persons of

 

standing in addition to its Chairman and the representatives of the competent

 

authorities.

 

c)      The advisory commission will be assisted by a Secretariat for which the

 

facilities will be provided by the Contracting State that initiated the

 

establishment of the advisory commission unless otherwise agreed by the

 

Contracting States concerned. For reasons of independence, this Secretariat

 

will function under the supervision of the Chairman of the advisory

 

commission. Members of the Secretariat will be bound by the secrecy

 

provisions as stated in Article 9 (6) of the Arbitration Convention.

 

d)      The place where the advisory commission meets and the place where its opinion

 

is to be delivered may be determined in advance by the competent authorities of

 

the Contracting States concerned.

 

e)      Contracting States will provide the advisory commission before its first

 

meeting, with all relevant documentation and information and in particular all

 

documents, reports, correspondence and conclusions used during the mutual

 

agreement procedure.

 

 

 

4.3    Functioning of the advisory commission

 

 

 

a)      A case is considered to be referred to the advisory commission on the date

 

when the Chairman confirms that its members have received all relevant

 

documentation and information as specified under point 4.2 e).

 

b)      The proceedings of the advisory commission will be conducted in the official

 

language or languages of the Contracting States involved, unless the competent

 

authorities decide otherwise by mutual agreement, taking into account the wishes

 

of the advisory commission.

 

c)      The advisory commission may request from the party from which a statement or

 

document emanates to arrange for a translation into the language or languages in

 

which the proceedings are conducted.

 

d)      Whilst respecting the provisions of Article 10 of the Arbitration Convention, the

 

advisory commission may request the Contracting States and in particular the

 

Contracting State that issued the first tax assessment notice, i.e. final decision of

 

the tax administration on the additional income, or equivalent which resulted or

 

may result in double taxation within the meaning of Article 1, to appear before

 

the advisory commission.

 

e)      The costs of the advisory commission procedure, which will be shared equally

 

by the Contracting States concerned, will be the administrative costs of the

 

advisory commission and the fees and expenses of the independent persons of

 

standing.

 

f)      Unless the competent authorities of the Contracting States concerned agree

 

otherwise:

 

 

 

i)       the reimbursement of the expenses of the independent persons of

 

standing will be limited to the reimbursement usual for high ranking civil

 

servants of the Contracting State which has taken the initiative to

 

establish the advisory commission;

 

ii)      the fees of the independent persons of standing will be fixed at Euro 1000

 

per person per meeting day of the advisory commission, and the

 

Chairman will receive a 10% higher fee than the other independent

 

persons of standing.

 

 

 

g)      Actual payment of the costs of the advisory commission procedure will be

 

made by the Contracting State which has taken the initiative to establish the

 

advisory commission, unless the competent authorities of the Contracting

 

States concerned decide otherwise.

 

 

 

4.4    Opinion of the advisory commission

 

 

 

Contracting States would expect the opinion to contain:

 

 

 

a)      the names of the members of the advisory commission;

 

b)      the request; the request contains:

 

 

 

      the names and addresses of the enterprises involved;

 

      the competent authorities involved;

 

       a description of the facts and circumstances of the dispute;

 

      a clear statement of what is claimed;

 

 

 

c)      a short summary of the proceedings;

 

d)      the arguments and methods on which the decision in the opinion is based;

 

e)      the opinion;

 

f)      the place where the opinion is delivered;

 

g)      the date on which the opinion is delivered;

 

h)      the signatures of the members of the advisory commission.

 

 

 

The decision of the competent authorities and the opinion of the advisory commission

 

will be communicated as follows:

 

 

 

i)       Once the decision has been taken, the competent authority to whom the case

 

was presented will send a copy of the decision of the competent authorities and

 

the opinion of the advisory commission to each of the enterprises involved.

 

ii)      The competent authorities of the Contracting States can agree that the decision

 

and the opinion may be published in full, they can also agree to publish the

 

decision and the opinion without mentioning the names of the enterprises

 

involved and with deletion of any further details that might disclose the identity

 

of the enterprises involved. In both cases, the enterprises' consent is required

 

and prior to any publication the enterprises involved must have communicated

 

in writing to the competent authority to whom the case was presented that they

 

do not have objections to publication of the decision and the opinion.

 

iii)     The opinion of the advisory commission will be drafted in three original

 

copies, two to be sent to the competent authorities of the Contracting States and

 

one to be transmitted to the Secretariat General of the Council for archiving. If

 

there is agreement on the publication of the opinion, the Secretariat General of

 

the Council will request publication in the Official Journal of the European

 

Union.

 

 

 

5.      Suspension of tax collection during cross border dispute resolution

 

procedures

 

 

 

Member States are recommended to take all necessary measures to ensure that the

 

suspension of tax collection during cross-border dispute resolution procedures under

 

the Arbitration Convention can be obtained by enterprises engaged in such

 

procedures, under the same conditions as those engaged in a domestic

 

appeals/litigation procedure although these measures may imply legislative changes

 

in some Member States. It would be appropriate for Member States to extend these

 

measures to the cross-border dispute resolution procedures under double tax treaties

 

between Member States.

 

 

 

6.      Accession of new EU Member States to the Arbitration Convention

 

 

 

Member States will endeavour to sign and ratify the Accession Convention of new

 

EU Member States to the Arbitration Convention, as soon as possible and in any

 

event no later than two years after their accession to the EU.

 

 

 

7.      Final provisions

 

 

 

In order to ensure the even and effective application of the Code, Member States are

 

invited to report to the Commission on its practical functioning every two years. On

 

the basis of these reports, the Commission intends to report to the Council and may

 

propose a review of the provisions of the Code.


ANNEX III: REPORT ON THE ACTIVITIES OF THE EU JOINT TRANSFER

 

PRICING FORUM IN THE FIELD OF BUSINESS TAXATION

 

OCTOBER 2002 – DECEMBER 2003

 

 

 

1.      SUMMARY OF THE PROCEEDINGS OF THE MEETINGS OF THE EU JOINT TRANSFER

 

PRICING FORUM

 

 

 

1.1.   Inaugural meeting

 

 

 

The inaugural meeting of the EU Joint Transfer Pricing Forum (hereafter: JTPF)

 

under the Chairmanship of Mr. Bruno Gibert, was held on 3 October 2002 and was

 

mainly devoted to the discussion and adoption of internal rules of procedure, the

 

election of Vice-Chairpersons for the Member States and business representatives

 

and the discussion of an issues paper in order to establish a two–year working

 

programme as suggested by the Council conclusions of 11 March 2002.

 

 

 

The internal rules of procedure were adopted by consensus. Business experts elected

 

Mr. Guy Kersch, Director European Taxes of Pharmacia S.A., Luxemburg, and tax

 

administration experts elected Mrs. Montserrat Trape Viladomat, Deputy Head of

 

the International Taxation Unit from Spain as Vice-Chairpersons.

 

 

 

The draft two-year working program was discussed and with some minor

 

amendments subsequently approved in the second meeting. The discussion showed

 

that most Members were of the opinion that, in line with the Council conclusions of

 

11 March 2001, the highest priority should be attributed to practical solutions for a

 

more uniform application of the Arbitration Convention in order to achieve more

 

certainty as regards the procedural issues of the Arbitration Convention.[5] That

 

included both the first phase of the Arbitration Convention, i.e. the mutual agreement

 

procedure, and the second phase, i.e. the arbitration itself.

 

 

 

The prevailing view of the Members of the JTPF was that the issue of documentation

 

requirements for transfer prices should also be addressed by the JTPF.

 

 

 

It was also concluded that despite the demand for Advance Pricing Agreements

 

(APA) from businesses, APAs faced quite some scepticism and criticism because of

 

the shortcomings linked to them. The JTPF should therefore in the first place study

 

other procedural means to enable taxpayers to achieve greater certainty and in

 

particular the possibility of prior consultation between tax administrations before

 

making adjustments. Both issues should be examined together but were attributed

 

lower priority.

 

 

 

1.2.   Subsequent meetings

 

 

 

Following its agreed two–year working program, the JTPF examined during its

 

meetings on 4 December 2002, 2 April 2003, 19 June 2003, 11 September 2003 and

 

11 December 2003 procedural issues related to the improvement of the practical

 

functioning of the Arbitration Convention and certain related aspects of mutual

 

agreement procedures (MAP) under double tax treaties between Member States.

 

Discussions included the procedures to be followed during the interim period when

 

not all Member States have ratified the 1999 Protocol extending the Convention (of

 

which the application ended on 31 December 1999), the starting point of the threeyear

 

period, which is the deadline to present a case to a competent authority

 

(Art. 6.1), the starting point of the two-year period foreseen for the mutual agreement

 

procedure, i.e. the first phase provided for in the Arbitration Convention, (Art. 7.1),

 

proceedings during this mutual agreement procedure (expediting the procedure,

 

suspension of tax collection, interest charges and refunds, transparency and taxpayer

 

participation), proceedings of the arbitration i.e. after the MAP the second phase of

 

the Arbitration Convention (Art. 7 to 11) and the interaction of the mutual agreement

 

procedure and arbitration with administrative and judicial appeals.(Art. 7.3)

 

 

 

In accordance with its two-year working program, the JTPF began to discuss in

 

December 2003, the issue of transfer pricing documentation requirements.

 

 

 

1.3.   Conclusions

 

 

 

The JTPF made substantial progress on the procedural issues related to the

 

improvement of the practical functioning of the Arbitration Convention and related

 

issues of the mutual agreement procedures under double tax treaties between

 

Member States. Taking into account the potential benefit both for businesses and

 

national tax administrations of a rapid implementation of its conclusions and

 

recommendations, the JTPF decided to submit to the Commission an interim report

 

on its activities so far.

 

 

 

Having regard to what follows, the JTPF was of the opinion that the best way to deal

 

with its various conclusions and recommendations, was to propose a Code of

 

Conduct for the implementation of Convention 90/436/EEC of 23 July 1990 on the

 

elimination of double taxation in connection with the adjustment of profits of

 

associated enterprises and on certain aspects of the mutual agreement procedures

 

under Double Tax Treaties between Member States, as presented in Annex II to this

 

report. The Commission could propose to the Council to adopt this Code of Conduct.

 

 

 

2.      CONCLUSIONS AND RECOMMENDATIONS ON ISSUES RELATED TO THE ARBITRATION CONVENTION AND ON CERTAIN RELATED ISSUES OF MUTUAL AGREEMENT PROCEDURES UNDER DOUBLE TAX TREATIES BETWEEN MEMBER STATES

 

 

 

2.1.   Proceedings during the interim period when not all contracting states have

 

ratified the Accession Convention of the Republic of Austria, the Republic of

 

Finland and the Kingdom of Sweden (Accession Convention) and the Protocol

 

amending the original Convention (Prolongation Protocol)

 

 

 

In spite of the signature of the relevant instruments on 25 May 1999 and

 

21 December 1995 respectively, so far, Italy and Portugal still have not ratified the

 

Prolongation Protocol and Greece has not ratified the Accession Convention.

 

 

 

The Arbitration Convention has therefore not been in force since 1 January 2000.

 

Associated companies are thus unable to rely on this instrument to avoid or remedy

 

double taxation.

 

 

 

The JTPF examined the different practical situations and problems which can occur

 

during this interim period and the possible consequences on the implementation of

 

the Arbitration Convention when it re-enters into force.

 

 

 

2.1.1.   Procedure in cases where a request has been made by a taxpayer before

 

1 January 2000

 

 

 

All Member States except Denmark will complete cases, which have been initiated

 

under the Arbitration Convention prior to 1 January 2000, according to the rules of

 

the Arbitration Convention. Denmark, however, continues MAP procedures under

 

the pertinent double tax treaty. Two other Member States also consider that the

 

procedures under the Arbitration Convention are suspended while the Convention is

 

not in force but have no cases that were submitted before 1 January 2000.

 

 

 

2.1.2.   Procedure in cases where a request is made by a taxpayer after 1 January 2000

 

 

 

There is consensus that a taxpayer’s request to invoke the Arbitration Convention is

 

in principle valid under the Prolongation Protocol. This means that an enterprise may

 

present a case to a competent authority but that in practice there is no time limit for

 

the MAP nor for initiating the arbitration phase.

 

 

 

The multitude of possible positions as regards the implementation of the Arbitration

 

Convention during the interim period, including both the MAP and arbitration phase,

 

reflected in Annex I to this report, highlights the legal uncertainty for companies to

 

make use of the Arbitration Convention and in particular to see the arbitration phase

 

applied.

 

 

 

All Member States, however, initiate a MAP either under the rules of the Arbitration

 

Convention (if the other Member State agrees, see Annex I) or under the double tax

 

treaty with the other Member State.

 

 

 

The majority of Members supports the idea that time spent on a MAP under a double

 

tax treaty should be subtracted from the 2-year period foreseen in Article 7 (1) of the

 

Arbitration Convention once the competent authorities initiate or continue the MAP

 

under the Arbitration Convention.

 

A detailed overview of Member States positions can be found in Annex I to this

 

report.

 

 

 

2.1.3. Conclusions

 

 

 

Although the JTPF found it useful to clarify the approaches of the different national

 

tax authorities during the interim period, Members concluded, considering the

 

transitional nature and the limited impact of the interim period, not to issue any

 

proposals or recommendations having regard to this period.

 

 


2.2.   The starting point of the three- and two-year periods enshrined in the first

 

phase of the Arbitration Convention

 

 

 

2.2.1. The starting point of the three-year period (deadline for submitting the request

 

according to Article 6 (1) of the Arbitration Convention and Article 25 (1) of the

 

OECD Model Tax Convention)

 

 

 

Article 6 (1) of the Arbitration Convention provides that “…The case must be

 

presented within three years of the first notification of the action which results or is

 

likely to result in double taxation within the meaning of Article 1.”

 

 

 

All Member States favour: ”the date of the first tax assessment notice or equivalent

 

which results, or is likely to result, in double taxation within the meaning of Article

 

1, e.g. due to a transfer pricing adjustment”[6] as the definition for the relevant action

 

that triggers the starting point for the three-year period.

 

 

 

Member States’ definitions of this relevant event in the national language and in

 

English are set out in the Annex to the draft Code of Conduct as presented in

 

Annex II to this report.

 

 

 

The OECD Model Tax Convention on Income and Capital, which is the basis of all

 

double tax treaties between EU Member States, contains in its Article 25 (1) a similar

 

wording as the Arbitration Convention in its Article 6 (1) as regards the time limits to

 

present a case of double taxation to the competent authorities.

 

 

 

As a matter of coherence and as far as transfer pricing cases are concerned, the JTPF

 

therefore recommends Member States to apply the definition of the start of the threeyear

 

period, as specified in the Annex to the draft Code of Conduct, also to double

 

tax treaties between Member States.

 

 

 

2.2.2. The starting point of the two-year period (Article 7 (1) of the Arbitration Convention)

 

 

 

The Arbitration Convention does not provide in its Articles 6 (1) nor 7 (1) for any

 

specific requirement, except the “presentation or submission of a case”, to start the

 

two-year mutual agreement period. During this period, the relevant competent

 

authorities should seek, under a MAP, an agreement to eliminate the double taxation

 

without the need to initiate the arbitration phase of the Arbitration Convention.

 

 

 

 

 

The JTPF has recognised that for “a case” to be considered as being “presented” or

 

“submitted” and in order to provide a sufficient base to permit the competent

 

authority to assess whether a complaint is “well-founded” (which is, as defined under

 

Article 6.2 of the Arbitration Convention, a prior condition to initiate a mutual

 

agreement procedure), a minimum of information, as defined in chapter 2 of the

 

Code of Conduct, from the taxpayer is necessary. Besides this minimum information,

 

the competent authority should be entitled, within two months from the receipt of the

 

taxpayer's request, to ask for specific additional information before the two-year

 

period starts. In case the competent authority does not issue such a request, the twoyear

 

period starts on the date as indicated in the Code of Conduct.

 

 

 

Without questioning the reliability and good faith of the information provided by a

 

large majority of enterprises, the JTPF would also like to stress the need for taxpayers’

 

full co-operation to maximise the possibilities of reaching a mutual

 

agreement as quickly as possible. This co-operation should not only be limited to the

 

initiation of the procedure but should be ensured throughout the whole mutual

 

agreement procedure. The JTPF is also of the opinion that this co-operation should

 

not only be ensured by the enterprise that has presented the case, but also by the

 

other parties to the relevant transactions, and that failure to do so could result in the

 

procedure taking longer than would otherwise have been the case.

 

 

 

2.3.   Proceedings during the first phase of the Arbitration Convention

 

 

 

Once the competent authorities have received all necessary information to enable a

 

decision to be made as to whether the case appears to be well founded (see 2.2.2), the

 

two-year period during which a mutual agreement between the competent authorities

 

on the elimination of double taxation should be reached starts.

 

 

 

The JTPF is of the opinion that the proposal of a tentative time scale for MAPs,

 

including the moment of exchange of position papers, could be useful to improve

 

timing of the different actions, co-ordination and speeding-up of proceedings.

 

 

 

Furthermore it is agreed as a general principle, that all appropriate means for

 

reaching a mutual agreement as expeditiously as possible should be considered and

 

that standards of best practice as regards the use of language and information of the

 

taxpayer should be set.

 

 

 

There is consensus that taxpayers should not be granted the right to be present at

 

competent authority discussions. Most Members agree that on the request of a

 

taxpayer, a presentation to its competent authority should be granted.

 

 

 

As far as transfer pricing cases are concerned, and without prejudice to arrangements

 

on a more global level, the JTPF recommends Member States to apply the provisions

 

of the Code of Conduct related to MAPs under the Arbitration Convention also to

 

double tax treaties between Member States.

 

 

 

2.4.   Proceedings during the second phase of the Arbitration Convention:

 

establishment and functioning of the advisory commission

 

 

 

The JTPF concluded that Articles 7, 9, 10, 11 and 12 of the Arbitration Convention,

 

which relate to the functioning of the arbitration procedure (the second phase of the

 

Convention), are not sufficiently detailed to guarantee a smooth functioning of this

 

procedure.

 

 

 

According to information provided by the Council’s Secretariat General, the JTPF

 

established that in September 2003, five Contracting States (Greece, Finland, Ireland,

 

Portugal and Sweden) have so far not nominated their independent persons of

 

standing, eligible to become a Member of the advisory commission as referred to in

 

Article 7 (1) of the Convention. Other Contracting States’ nomination lists date from

 

shortly after the adoption of the Convention in 1990 which puts into question their

 

current value.

 

 

 

There are no detailed rules on the practical organisation of the arbitration phase, e.g.

 

which competent authority takes the initiative to establish the advisory commission,

 

where does the advisory commission meet, who provides the facilities for a

 

secretariat, when is a case considered as being referred to the advisory commission,

 

what is the level of fees of the Members and Chairman, what will be the content of

 

the opinion and what are the conditions for its publication, etc.

 

 

 

Based on the work already undertaken by the Council working group on financial

 

questions in 1996/1997 and the recent experience of certain Contracting States, the

 

JTPF agreed by consensus on a modus operandi for the arbitration phase, as reflected

 

in chapter 4 of the draft Code of Conduct presented in Annex II to this report.

 

 

 

2.5.   Interaction of the mutual agreement and arbitration procedure with

 

administrative and judicial appeals

 

 

 

The JTPF also examined the links between both types of procedures as reflected in

 

the Article 7 of the Arbitration Convention.

 

 

 

A first point of concern was the provision of Article 7 (1) second subparagraph

 

which provides that “Enterprises may have recourse to the remedies available to

 

them under the domestic law of the Contracting States concerned; however, where

 

the case has so been submitted to a court or tribunal, the term of two years referred

 

to in the first subparagraph shall be computed from the date on which the judgement

 

of the final court of appeal was given”.

 

 

 

Business experts were of the view that the independence of the two remedies is very

 

limited insofar as – in the event that the domestic judicial remedy is activated – the

 

most important phase of the Arbitration Convention (the setting up of the advisory

 

commission) may be pursued only after the domestic judicial remedy has been

 

exhausted and the two-year mutual agreement period has elapsed. Moreover, some

 

national tax authorities do not seem to make a distinction between administrative and

 

judicial appeal, only the latter being determined in the aforementioned Article 7 (1)

 

as being a reason to defer the start of the two-year period. This might create a

 

significant drawback to the operation and effectiveness of the Arbitration Convention

 

since it can make the total duration of the Arbitration Convention proceedings equal

 

to: (i) the duration of the domestic administrative/judicial proceedings ending with a

 

final judicial judgement; (ii) plus two years; (iii) plus the six months available to the

 

advisory commission to deliver its opinion.

 

 

 

A similar concern was expressed by business as regards the application of Article

 

7 (3) of the Arbitration Convention which stipulates that ”Where the domestic law of

 

a Contracting State does not permit the competent authorities of that State to

 

derogate from the decisions of their judicial bodies, paragraph 1 shall not apply

 

unless the associated enterprise of that State has allowed the time provided for

 

appeal to expire, or has withdrawn any such appeal before a decision has been

 

delivered”. Although France and the United Kingdom are the only Contracting

 

States that made a formal declaration that this provision applies in their countries, a

 

survey demonstrated that a large majority of the Contracting States (and EU

 

Acceding Countries) apply/would apply the same rules in practice. In this respect it

 

needs to be noted that Art 7 (3) of the Arbitration Convention is self-executing and

 

does not specifically require a formal declaration to be applicable.

 

 

 

Business members claimed that the aforementioned provision in many cases lead

 

taxpayers to withdraw their domestic judicial remedies. Considering the potential of

 

the Arbitration Convention to eliminate double taxation, this should not necessarily

 

create disadvantages to the taxpayer. However, the choice of the enterprises to opt

 

for cross-border dispute resolution procedures instead of domestic judicial remedies

 

can have an important financial impact as discussed under 2.6 hereafter.

 

 

 

Considering the complexity of the issue, the JTPF decided to limit its

 

recommendations to the suspension of tax collection during cross-border dispute

 

resolution procedures discussed hereafter.

 

 

 

2.6.   Suspension of tax collection during cross-border dispute resolution procedures

 

 

 

The JTPF examined the existing rules in Member States and Acceding Countries in

 

relation to the suspension of tax collection during administrative and judicial

 

appeals/litigation. In almost all countries, the suspension of tax collection is

 

regulated at legal level in so far as domestic procedures are concerned. These rules

 

differ however widely as regards prior conditions, application, duration, amount of

 

suspension etc.

 

 

 

When it comes to rules in relation to cross-border dispute resolution procedures,

 

specific legal or administrative provisions exist only in few countries. However, a

 

significant number of tax administrations can suspend the collection of taxes on a

 

discretionary basis in order to avoid double payment even if specific provisions for

 

suspension during mutual agreement or arbitration procedures do not exist.

 

 

 

The absence of specific or general rules enabling the suspension of tax collection

 

during cross-border dispute resolution, at least under the same conditions as those

 

applicable for domestic appeal/litigation, creates an additional financial burden for

 

companies facing double taxation at Community level. In combination with the

 

provisions of Article 7 of the Arbitration Convention on the interaction between

 

administrative/judicial appeal and cross-border dispute resolution procedures as

 

discussed under 2.5, this is regarded by the business Members of the JTPF and most

 

tax authority Members as an impediment for taxpayers to request the application of

 

the Arbitration Convention or mutual agreement procedures under double tax treaties

 

between Member States.

 

 

 

2.7.   The accession of EU Acceding States to the Arbitration Convention

 

 

 

With the accession to the EU of Austria, Finland and Sweden, a new Convention

 

allowing these new Member States to accede to the Arbitration Convention, was

 

signed on 21 December 1995. However since one Member States still has not ratified

 

this Accession Convention (see 2.1), the Arbitration Convention has not fully entered

 

into force with the Member States which joined the EU in 1995

 

In order to avoid another lengthy process during which the Arbitration Convention

 

would not be applicable throughout the whole (enlarged) EU, the JTPF examined

 

ways to speed up the entry into force of the Arbitration Convention in the new EU

 

Member States following the forthcoming enlargement of the EU in May 2004. In

 

this respect, the possibilities of “provisional application” (application of Article 25 of

 

the UN Vienna Convention on the Law of Treaties) or “entry into force upon

 

signature” (Article 24 (1) of the aforementioned Vienna Convention) were

 

envisaged. However since both possible solutions would require, in a majority of

 

both current and future Member States, ratification by national parliament they

 

would not really speed up the process.

 

 

 

Regrettably there seems to be no legal means to speed up the entry into force of the

 

Arbitration Convention by the Acceding States. The JTPF has agreed therefore by

 

consensus to recommend Member States to commit to ratify the accession treaties to

 

the Arbitration Convention not later than two years[7] after the accession of new EU

 

Member States. This recommendation is also contained in the proposed Code of

 

Conduct.

 

 

 

2.8.   Conclusions

 

 

 

In view of paragraphs 2.1 to 2.7 of this chapter, the JTPF agreed by consensus to

 

invite the Commission to propose to the Council the adoption of a Code of Conduct

 

for the implementation of Convention 90/436/EEC of 23 July 1990, on the

 

elimination of double taxation in connection with the adjustment of profits of

 

associated enterprises, and on certain related issues of the mutual agreement

 

procedures under double tax treaties between Member States, as presented in Annex

 

II to this report.

 

 

 

3.      OTHER ISSUES EXAMINED BY THE JTPF IN RELATION TO DOUBLE TAXATION RESULTING FROM TRANSFER PRICING ADJUSTMENTS

 

 

 

3.1.   Interest charges for back taxes and interest on tax refunds

 

 

 

Most Member States and Acceding States have specific provisions concerning

 

interest charges in relation to additional back taxes for previous years and interest on

 

tax refunds. The interest rates are contained in civil/commercial law or specific tax

 

law and are, with some exceptions, regularly being revised based on different

 

criteria. Most countries apply flat interest rates.

 

 

 

Starting points for the calculation of the interest (both on additional back taxes and

 

tax refunds) vary widely between countries but seem coherent at national level. Tax

 

authorities which allow the deduction of interest payments on additional back taxes

 

as business expenses also consider interest received on tax refunds as taxable

 

income. For a majority of national tax administrations, however, interest is treated as

 

being tax neutral (no deduction/no taxation).

 

 

 

A more important finding in an EU context concerns corresponding adjustments

 

resulting from cross-border dispute resolution procedures (MAP or arbitration). None

 

of the countries, except for the Netherlands, provides for the possibility to agree in a

 

MAP for corresponding interest to be paid to the company on its overpaid taxes,

 

having regard to the interest charges on additional back taxes in the other Contracting

 

State (and vice versa) so as to balance the interest paid and received by the company

 

concerned.

 

 

 

Whereas the Arbitration Convention and double tax treaties between Member states

 

aim to eliminate double taxation, they do not provide for a balance of interest paid on

 

back taxes and interest received on tax refunds.

 

 

 

JTPF business members made a proposal on the suspension of the accrual of interest

 

for late payment in mutual agreement and arbitration procedures under the

 

Arbitration Convention.

 

 

 

Considering, however, the complexity of the issue, the JTPF decided to defer more

 

in-depth discussions on this to a later stage.

 

 

 

3.2.   Penalties

 

 

 

A specific penalty regime in relation to transfer pricing adjustments exists in only a

 

few countries. In all other countries, the general penalty regime applies. The criminal

 

nature of those penalties depends in most cases on the circumstances, except in one

 

country, where transfer pricing penalties are always considered to be of a criminal

 

nature. So-called “monetary no-fault” penalties do not seem to be common practice

 

in Member States nor Acceding States. The rules for interpretation and specification

 

of the amount of penalties are somewhat mixed; some countries regulate these issues

 

in detail whereas other countries leave the application of general penalty principles to

 

the discretion of the tax authorities. However, most countries provide for appeal

 

procedures. None of the tax authorities allow the deduction of penalty payments as

 

business expenses.

 

 

 

Again, considering the complexity of the issue and the potential impact on domestic

 

legislation, the JTPF decided to defer more in-depth discussions on this to a later

 

stage.

 

 

 

4.      CONCLUSIONS

 

 

 

The JTPF will continue its activities in 2004 on the basis of its agreed two-year

 

working programme.

 

 

 

In accordance with the Council conclusions of 11 March 2002, the JTPF invites the

 

Commission to transmit this activity report to the Council with a view to appropriate

 

follow-up action.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANNEX I: MEMBER STATES’ POSITION DURING THE INTERIM PERIOD

 

 

 

 

 

 

 

 

 

ANNEX I

 

Member States' positions during the interim period

(request filed after 1 January 2000)

 

 

Arbitration Convention

Mutual Agreement Procedure

(first phase)

 

 

 

 

 

 

Arbitration Procedure

(second phase)

Accept

request

and continue

under AC

if other

MS agrees

Accept

request

but continue

under DTA

AC suspended

so only

taken up when

it re-enters

into force

Continue

procedure

if other

MS agrees **

 Austria

 

X*

 

X

 

 Belgium

 

X

 

X

 

 Denmark

 

X*

 

X

 

 Finland

 

X

 

X

 

 France

 

X

 

X

 

 Germany

X

 

 

 

X

 Greece

X

 

 

 

X

 Ireland

X

 

 

 

X

 Italy

 

X*

 

X

 

 Luxembourg

X

 

 

 

X

 Netherlands

X

 

 

 

X

 Portugal

 

X

 

X

 

 Spain

X

 

 

 

X

 Sweden

 

X

 

X

 

 UK

X

 

 

 

X

 

 *   Only if specifically requested by the taxpayer

 **  If the other Member State does not agree, those Member States will - with the taxpayer’s consent - continue the MAP under the double taxation agreement with the other Member State

 

 

 

 


ANNEX II: DRAFT CODE OF CONDUCT

 

 

 

THE COUNCIL OF THE EUROPEAN UNION AND THE REPRESENTATIVES

 

OF THE GOVERNMENTS OF THE MEMBER STATES, MEETING WITHIN

 

THE COUNCIL,

 

 

 

HAVING REGARD TO Convention 90/436/EEC of 23 July 1990, on the

 

elimination of double taxation in connection with the adjustment of profits of

 

associated enterprises,

 

 

 

ACKNOWLEDGING the need both for Member States and taxpayers to have more

 

detailed rules to implement efficiently the aforementioned Convention,

 

 

 

NOTING the Commission communication on the report on the activities of the EU

 

Joint Transfer Pricing Forum in the field of business taxation of ……2004,

 

 

 

EMPHASISING that the Code of Conduct is a political commitment and does not

 

affect the Member States' rights and obligations or the respective spheres of

 

competence of the Member States and the Community resulting from the Treaty,

 

 

 

ACKNOWLEDGING that the implementation of this Code of Conduct should not

 

hamper solutions at more global level,

 

 

 

HEREBY ADOPT THE FOLLOWING CODE OF CONDUCT:

 

 

 

Without prejudice to the respective spheres of competence of the Member States

 

and the Community, this Code of Conduct concerns the implementation of

 

Convention 90/436/EEC of 23 July 1990, on the elimination of double taxation

 

in connection with the adjustment of profits of associated enterprises and

 

certain related issues of the mutual agreement procedure under double tax

 

treaties between Member States.

 

 

 

1.      The starting point of the three-year period (deadline for submitting the

 

request according to Article 6 (1) of the Arbitration Convention

 

 

 

The date of the “first tax assessment notice or equivalent which results or is likely to

 

result in double taxation within the meaning of Article 1, e.g. due to a transfer

 

pricing adjustment”[8] is considered as the starting point for the three-year period.

 

 

 

Member States’ definitions of the relevant event in the national language and in

 

English are set out in the Annex to this Code

 

 

 

As far as transfer pricing cases are concerned, Member States are recommended to

 

apply these definitions also to the determination of the three-year period as provided

 

for in Article 25 (1) of the OECD Model Tax Convention on Income and on Capital

 

and implemented in the double tax treaties between EU Member States.

 

 

 

2.      The starting point of the two-year period (Article 7 (1) of the Arbitration

 

Convention)

 

 

 

(i)      For the purpose of Article 7 (1) of the Convention, a case will be regarded as

 

having been submitted according to Article 6 (1) when the taxpayer provides

 

the following :

 

 

 

a)      identification (such as name, address, tax identification number) of the

 

enterprise of the Contracting State that presents its request and of the

 

other parties to the relevant transactions;

 

b)      details of the relevant facts and circumstances of the case (including

 

details of the relations between the enterprise and the other parties to the

 

relevant transactions);

 

c)      identification of the tax periods concerned;

 

d)      copies of the tax assessment notices, tax audit report or equivalent

 

leading to the alleged double taxation;

 

e)      details of any appeals and litigation procedures initiated by the enterprise

 

or the other parties to the relevant transactions and any court decisions

 

concerning the case;

 

f)      an explanation by the enterprise of why it thinks that the principles set

 

out in Article 4 of the Arbitration Convention have not been observed;

 

g)      an undertaking that the enterprise shall respond as completely and

 

quickly as possible to all reasonable and appropriate requests made by a

 

competent authority and have documentation at the disposal of the

 

competent authorities; and

 

h)      any specific additional information requested by the competent authority

 

within two months upon receipt of the taxpayer’s request.

 

 

 

(ii)     The two-year period starts on the latest of the following dates:

 

 

 

a)      the date of the tax assessment notice, i.e. a final decision of the tax

 

administration on the additional income, or equivalent;

 

b)      the date on which the competent authority receives the request and the

 

minimum information as stated under point 2 (i).

 

 

 

3.      Mutual agreement procedures under the Arbitration Convention

 

 

 

3.1    General provisions

 

 

 

a)      The arm’s length principle will be applied, as promulgated by the OECD,

 

without regard to the immediate tax consequences for any particular

 

Contracting State.

 

b)      Cases will be resolved as quickly as possible having regard to the complexity

 

of the issues in the particular case in question.

 

c)      Any appropriate means for reaching a mutual agreement as expeditiously as

 

possible, including face-to-face meetings, will be considered; where

 

appropriate, the enterprise will be invited to make a presentation to its

 

competent authority.

 

d)      Taking into account the provisions of this Code, a mutual agreement should be

 

reached within two years of the date on which the case was first submitted to

 

one of the competent authorities in accordance with point 2 (ii) of this Code.

 

e)      The mutual agreement procedure should not impose any inappropriate or

 

excessive compliance costs on the person requesting it, or on any other person

 

involved in the case.

 

 

 

3.2 Practical functioning and transparency

 

 

 

a)      In order to minimise costs and delays caused by translation, the mutual

 

agreement procedure, in particular the exchange of position papers, should be

 

conducted in a common working language, or in a manner having the same

 

effect, if the competent authorities can reach agreement on a bilateral basis.

 

b)      The enterprise requesting the mutual agreement procedure will be kept

 

informed by the competent authority to which it made the request of all

 

significant developments that affect it during the course of the procedure.

 

c)      The confidentiality of information relating to any person that is protected under

 

a bilateral tax convention or under the law of a Contracting State will be

 

ensured.

 

d)      The competent authority will acknowledge receipt of a taxpayer’s request to

 

initiate a mutual agreement procedure within one month from the receipt of the

 

request and at the same time inform the competent authorities of the other

 

Contracting States involved in the case attaching a copy of the taxpayer’s

 

request.

 

e)      If the competent authority believes that the enterprise has not submitted the

 

minimum information necessary for the initiation of a mutual agreement

 

procedure as stated under point 2 (i), it will invite the enterprise within two

 

months upon receipt of the request, to provide it with the specific additional

 

information it needs.

 

f)      Contracting States undertake that the competent authority will respond to the

 

enterprise making the request in one of the following forms:

 

 

 

(i)      if the competent authority does not believe that profits of the enterprise

 

are included, or are likely to be included, in the profits of an enterprise of

 

another Contracting State, it will inform the enterprise of its doubts and

 

invite it to make any further comments;

 

(ii)     if the request appears to the competent authority to be well-founded and

 

it can itself arrive at a satisfactory solution, it will inform the enterprise

 

accordingly and make as quickly as possible such adjustments or allow

 

such reliefs as are justified;

 

(iii)    if the request appears to the competent authority to be well-founded but it

 

is not itself able to arrive at a satisfactory solution, it will inform the

 

enterprise that it will endeavour to resolve the case by mutual agreement

 

with the competent authority of any other Contracting State concerned.

 

 

 

g)      If a competent authority considers a case to be well founded, it should initiate a

 

mutual agreement procedure by informing the competent authority of the other

 

Contracting State of its decision and attach a copy of the information as

 

specified under point 2 (i) of this Code. At the same time it will inform the

 

person invoking the Arbitration Convention that it has initiated the mutual

 

agreement procedure. The competent authority initiating the mutual agreement

 

procedure will also inform - on the basis of information available to it - the

 

competent authority of the other Contracting State and the person making the

 

request whether the case was presented within the time limits provided for in

 

Article 6 (1) of the Arbitration Convention and of the starting point for the twoyear

 

period of Article 7 (1) of the Arbitration Convention.

 

 

 

3.3    Exchange of position papers

 

 

 

a)      Contracting States undertake that when a mutual agreement procedure has been

 

initiated, the competent authority of the country in which a tax assessment, i.e.

 

a final decision of the tax administration on the income, or equivalent has been

 

made, or is intended to be made, which contains an adjustment that results, or

 

Is likely to result, in double taxation within the meaning of Article 1 of the

 

Arbitration Convention, will send a position paper to the competent authorities

 

of the other Contracting States involved in the case setting out:

 

 

 

(i)      the case made by the person making the request;

 

(ii)     its view of the merits of the case, e.g. why it believes that double taxation

 

has occurred or is likely to occur;

 

(iii)    how the case might be resolved with a view to the elimination of double

 

taxation together with a full explanation of the proposal.

 

 

 

b)      The position paper will contain a full justification of the assessment or

 

adjustment and will be accompanied by basic documentation supporting the

 

competent authority’s position and a list of all other documents used for the

 

adjustment.

 

c)      The position paper will be sent to the competent authorities of the other

 

Contracting States involved in the case as quickly as possible taking account of

 

the complexity of the particular case and no later than four months from the

 

latest of the following dates:

 

 

 

i)       the date of the tax assessment notice, i.e. final decision of the tax

 

administration on the additional income, or equivalent;

 

ii)      the date on which the competent authority receives the request and the

 

minimum information as stated under point 2 (i).

 

 

 

d)      Contracting States undertake that, where a competent authority of a country in

 

which no tax assessment or equivalent has been made, or is not intended to be

 

made, which results, or is likely to result, in double taxation within the

 

meaning of Article 1 of the Arbitration Convention, e.g. due to a transfer

 

pricing adjustment, receives a position paper from another competent authority

 

it will respond as quickly as possible taking account of the complexity of the

 

particular case and no later than six months after receipt of the position paper.

 

e)      The response should take one of the following two forms:

 

 

 

(i)      if the competent authority believes that double taxation has occurred, or

 

is likely to occur, and agrees with the remedy proposed in the position

 

paper, it will inform the other competent authority accordingly and make

 

such adjustments or allow such relief as quickly as possible;

 

(ii)     if the competent authority does not believe that double taxation has

 

occurred, or is likely to occur, or does not agree with the remedy

 

proposed in the position paper, it will send a responding position paper to

 

the other competent authority setting out its reasons and proposing an

 

indicative time scale for dealing with the case taking into account its

 

complexity. The proposal will include, whenever appropriate, a date for a

 

face-to-face meeting, which should take place no later than 18 months

 

from the latest of the following dates:

 

 

 

aa)    the date of the tax assessment notice, i.e. final decision of the tax

 

administration on the additional income, or equivalent;

 

bb)    the date on which the competent authority receives the request and

 

the minimum information as stated under point 2 (i).

 

 

 

f)      Contracting States will further undertake any appropriate steps to speed up all

 

procedures wherever possible. In this respect, Contracting States should

 

envisage to organise regularly, and at least once a year, face-to-face-meetings

 

between their competent authorities to discuss pending mutual agreement

 

procedures (provided that the number of cases justifies such regular meetings).

 

 

 

3.4    Double tax treaties between Member States

 

 

 

As far as transfer pricing cases are concerned, Member States are recommended to

 

apply the provisions of points 1 to 3 also to mutual agreement procedures initiated in

 

accordance with Article 25 (1) of the OECD Model Convention on Income and on

 

Capital, implemented in the Double tax treaties between Member States.

 

 

 

4.      Proceedings during the second phase of the Arbitration Convention

 

 

 

4.1    List of independent persons

 

 

 

a)      Contracting States commit themselves to inform without any further delay the

 

Secretary General of the Council of the European Union of the names of the

 

five independent persons of standing, eligible to become a Member of the

 

advisory commission as referred to in Article 7 (1) of the Arbitration

 

Convention and inform, under the same conditions, of any alteration of the list.

 

b)      When transmitting the names of their independent persons of standing to the

 

Secretary General of the Council of the European Union, Contracting States

 

will join a curriculum vitae of those persons, which should, among other

 

things, describe their legal, tax and especially transfer pricing experience.

 

c)      Contracting States may also indicate on their list those independent persons of

 

standing who fulfil the requirements to be elected as Chairman.

 

d)      The Secretary General of the Council will address every year a request to

 

Contracting States to confirm the names of their independent persons of

 

standing and/or give the names of their replacements.

 

e)      The aggregate list of all independent persons of standing will be published on

 

the Council’s web-site.

 

 


4.2    Establishment of the advisory commission

 

 

 

a)      Unless otherwise agreed between the Contracting States concerned, the

 

Contracting State that issued the first tax assessment notice, i.e. final decision

 

of the tax administration on the additional income, or equivalent which results,

 

or is likely to result, in double taxation within the meaning of Article 1 of the

 

Arbitration Convention, takes the initiative for the establishment of the advisory

 

commission and arranges for its meetings, in agreement with the other

 

Contracting State.

 

b)      The advisory commission will normally consist of two independent persons of

 

standing in addition to its Chairman and the representatives of the competent

 

authorities.

 

c)      The advisory commission will be assisted by a Secretariat for which the

 

facilities will be provided by the Contracting State that initiated the

 

establishment of the advisory commission unless otherwise agreed by the

 

Contracting States concerned. For reasons of independence, this Secretariat

 

will function under the supervision of the Chairman of the advisory

 

commission. Members of the Secretariat will be bound by the secrecy

 

provisions as stated in Article 9 (6) of the Arbitration Convention.

 

d)      The place where the advisory commission meets and the place where its opinion

 

is to be delivered may be determined in advance by the competent authorities of

 

the Contracting States concerned.

 

e)      Contracting States will provide the advisory commission before its first

 

meeting, with all relevant documentation and information and in particular all

 

documents, reports, correspondence and conclusions used during the mutual

 

agreement procedure.

 

 

 

4.3    Functioning of the advisory commission

 

 

 

a)      A case is considered to be referred to the advisory commission on the date

 

when the Chairman confirms that its members have received all relevant

 

documentation and information as specified under point 4.2 e).

 

b)      The proceedings of the advisory commission will be conducted in the official

 

language or languages of the Contracting States involved, unless the competent

 

authorities decide otherwise by mutual agreement, taking into account the wishes

 

of the advisory commission.

 

c)      The advisory commission may request from the party from which a statement or

 

document emanates to arrange for a translation into the language or languages in

 

which the proceedings are conducted.

 

d)      Whilst respecting the provisions of Article 10 of the Arbitration Convention, the

 

advisory commission may request the Contracting States and in particular the

 

Contracting State that issued the first tax assessment notice, i.e. final decision of

 

the tax administration on the additional income, or equivalent which resulted or

 

may result in double taxation within the meaning of Article 1, to appear before

 

the advisory commission.

 

e)      The costs of the advisory commission procedure, which will be shared equally

 

by the Contracting States concerned, will be the administrative costs of the

 

advisory commission and the fees and expenses of the independent persons of

 

standing.

 

f)      Unless the competent authorities of the Contracting States concerned agree

 

otherwise:

 

 

 

i)       the reimbursement of the expenses of the independent persons of

 

standing will be limited to the reimbursement usual for high ranking civil

 

servants of the Contracting State which has taken the initiative to

 

establish the advisory commission;

 

ii)      the fees of the independent persons of standing will be fixed at Euro 1000

 

per person per meeting day of the advisory commission, and the

 

Chairman will receive a 10% higher fee than the other independent

 

persons of standing.

 

 

 

g)      Actual payment of the costs of the advisory commission procedure will be

 

made by the Contracting State which has taken the initiative to establish the

 

advisory commission, unless the competent authorities of the Contracting

 

States concerned decide otherwise.

 

 

 

4.4    Opinion of the advisory commission

 

 

 

Contracting States would expect the opinion to contain:

 

 

 

a)      the names of the members of the advisory commission;

 

b)      the request; the request contains:

 

 

 

      the names and addresses of the enterprises involved;

 

      the competent authorities involved;

 

             a description of the facts and circumstances of the dispute;

 

      a clear statement of what is claimed;

 

 

 

c)      a short summary of the proceedings;

 

d)      the arguments and methods on which the decision in the opinion is based;

 

e)      the opinion;

 

f)      the place where the opinion is delivered;

 

g)      the date on which the opinion is delivered;

 

h)      the signatures of the members of the advisory commission.

 

 

 

The decision of the competent authorities and the opinion of the advisory commission

 

will be communicated as follows:

 

 

 

i)       Once the decision has been taken, the competent authority to whom the case

 

was presented will send a copy of the decision of the competent authorities and

 

the opinion of the advisory commission to each of the enterprises involved.

 

ii)      If the competent authorities of the Contracting States concerned agree that the

 

decision and the opinion may be published, they will only do so if both of the

 

enterprises involved communicate in writing to the competent authority to

 

whom the case was presented that they do not have objections to publication of

 

the decision and the opinion. With the consent of the enterprises involved, the

 

competent authorities of the Contracting States concerned can also agree to

 

publish the decision and the opinion without mentioning the names of the

 

enterprises involved and with deletion of any further details that might disclose

 

the identity of the enterprises involved.

 

iii)     The opinion of the advisory commission will be drafted in three original

 

copies, two to be sent to the competent authorities of the Contracting States and

 

one to be transmitted to the Secretariat General of the Council for archiving. If

 

there is agreement on the publication of the opinion, the Secretariat General of

 

the Council will request publication in the Official Journal of the European

 

Union.

 

 

 

5.      Suspension of tax collection during cross border dispute resolution

 

procedures

 

 

 

Member States are recommended to take all necessary measures to ensure that the

 

suspension of tax collection during cross-border dispute resolution procedures under

 

the Arbitration Convention can be obtained by enterprises engaged in such

 

procedures, under the same conditions as those engaged in a domestic

 

appeals/litigation procedure although these measures may imply legislative changes

 

in some Member States. It would be appropriate for Member States to extend these

 

measures to the cross-border dispute resolution procedures under double tax treaties

 

between Member States.

 

 

 

6.      Accession of new EU Member States to the Arbitration Convention

 

 

 

Member States will endeavour to sign and ratify the Accession Convention of new

 

EU Member States to the Arbitration Convention, as soon as possible and in any

 

event no later than two years after their accession to the EU.[9]

 

 

 

7.      Final provisions

 

 

 

In order to ensure the even and effective application of the Code, Member States are

 

invited to report to the Commission on its practical functioning every two years. On

 

the basis of these reports, the Commission will report to the Council and may

 

propose a review of the provisions of the Code.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANNEX TO THE DRAFT CODE OF CONDUCT

 

 

 

The starting point of the three-year period (deadline for submitting the request

 

according to Article 6 (1) of the Arbitration Convention or Article 25 (1) of the

 

OECD Model Tax Convention on Income and Capital)

 

 

 

Member

State

Implementation of the definition

in national legislation

Member States' translation in EN

of their implementation of the

definition in national legislation

Austria

Die Zustellung des

Steuerbescheides [der zu einer

Doppelbesteuerung, z.B. aufgrund

einer Verrechnungspreiskorrektur,

führt]

The date on which the taxpayer

receives the tax assessment notice or

equivalent [that results in double

taxation, e.g. due to a transfer

pricing adjustment]

Belgium

La date d’envoi de l’avertissementextrait

de rôle comportant

l’imposition ou le supplément

d’imposition /en Nl. : de

verzendingsdatum van het

aanslagbiljet dat de aanslag of de

aanvullende aanslag omvat

The date on which the notice of

assessment is sent containing the

assessment or the supplementary

assessment

Denmark

Såfremt skattemyndighederne agter

at foretage en skatteansættelse på et

andet grundlag end det, der er

selvangivet, skal den skattepligtige

underrettes skriftlig herom. Det

skal samtidig underrettes om, at

skatteyder har en frist på mindst

15 dage regnet fra skrivelsens

datering, til at fremkomme med en

udtalelse imod den forelåede

ændring af skatteansættelsen, jf.

Skattestyrelseslovens §§ 3, stk. 4

og 12A.Har den skattepligtige

udtalt sig inden fristens udløb, skal

skattemyndighederne give skriftlig

underretning om skatteansættelsen

(kendelse).

 

I Danmark vil den første endelige

underretning fra

skattemyndighederne om

armslængde reguleringen blive

givet ved modtagelsen af

kendelsen, hvorfor treårsfristen i

henhold til Voldgiftskonventionens

art. 6.1 begynder at løbe fra dette

tidspunkt.

The date on which the taxpayer

receives the final assessment from the

tax authorities

 

[If the tax authorities intend to make

an assessment not in accordance with

a tax return, a notice specifying the

amendment and the reason for it must

be sent to the taxpayer. The taxpayer

must be given a period of at least 15

days from the date of the notice to

submit its comments on the

amendment. Hereafter the tax

authorities send the final assessment

to the taxpayer.]

 

 


 

 

Member

State

Implementation of the definition

in national legislation

Member States' translation in EN

of their implementation of the

definition in national legislation

Finland

Se päivä, jona verovelvollinen on

saanut tiedon verotuspäätöksestä tai

vastaavasta toimenpiteestä, jolla

siirtohinnoittelua on oikaistu.

(Suomessa kysymyksessä voi olla

säännönmukainen verotus,

oikaisuvaatimuksen johdosta

annettu päätös tai

jälkiverotuspäätös.)

 

på svenska:

 

Dagen då den skattskyldige fått

kännedom om skattebeslutet eller

motsvarande åtgärd, genom vilken

den interna prissättningen har

korrigerats. (I Finland: ordinarie

beskattning, beslut om

skatterättelse eller beslut om

efterbeskattning)

The date on which the taxpayer

receives the tax assessment notice or

equivalent [that reflects the transfer

pricing adjustment]

 

(In Finland: tax decision, notice of

tax adjustment or notice of reassessment)

France

• La date de réception de la

  notification de redressements en

  cas de procédure contradictoire,

 

• La date de réception de la

  notification des bases ou

  éléments d’imposition en cas de

  procédure d’office

The date of receipt of the notification

of adjustments or the notification of

basis of elements of assessments in

case of estimated assessment

Germany

Die Bekanntgabe des ersten

Bescheides, der zu einer

Doppelbesteuerung führt

The date on which the taxpayer

receives the first tax assessment

notice or equivalent that results in

double taxation

Greece

από την ημερομηνία επίδοσης του

φύλλου ελέγχου

From the date of service (receipt) of

the tax assessment notice

Ireland

The date of the issue to the

taxpayer of a notice of an

assessment, or of an amended

assessment [reflecting the

determination by an inspector of

taxes of a transfer pricing issue]

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

Member

State

Implementation of the definition

in national legislation

Member States' translation in EN

of their implementation of the

definition in national legislation

Italy[10]

"Avviso di accertamento"

 

Per avviso di accertamento si

intende l’atto scritto con il quale

l’Amministrazione fiscale

comunica al contribuente di aver

accertato un reddito imponibile

maggiore del reddito dichiarato

oppure un reddito imponibile non

dichiarato.

The date on which the taxpayer

receives the notice of assessment that

reflects the transfer pricing

adjustment

 

Avviso d’accertamento» means a

formal written act through which the

tax administration notifies the

taxpayer to have assessed taxable

income that resulted to be higher

than the declared income or that was

not declared at all.]

Luxembourg

« Bulletin », effet: le troisième jour

ouvrable qui suit la remise de

l'envoi à la poste

 

Das Datum des dritten Arbeitstages

nach Absendung des Bescheids

 

[Les différents bulletins (bulletin d’impôt, bulletin de fixation, bulletin d’établissement séparé, bulletin provisoire, définitif, rectificatif…..) émis par l’administration des contributions

du Luxembourg peuvent être désignés dans le contexte de la convention d’arbitrage par le mot « bulletin », en anglais « assessment », en allemand

« Bescheid ».]

The date of the third working day

following the sending of the

assessment

Netherlands

Navorderingsaanslag, of primaire

aanslag indien de

verrekenprijscorrectie hierin is

begrepen"

The date of the tax re-assessment

notice, or original assessment [if it

includes the transfer pricing

adjustment]

Portugal

Data da notificação legal do acto de

liquidação efectuado pela

Administração Fiscal ou data da

liquidação efectuada pelo

contribuinte, quando incluir o

ajustamento do lucro tributável que

origine ou seja susceptível de

originar uma dupla tributação.

Constitui notificação o recebimento

pelo contribuinte de cópia do

assento do acto da liquidação

Date of legal notification of the

assessment or re-assessment act made by the tax administration or the date of the self-assessment, if it includes the taxable profit adjustment which results or is likely to result in double taxation

 

Notification means the receipt by the

taxpayer of the tax assessment or reassessment

notice

 

 

 

Member

State

Implementation of the definition

in national legislation

Member States' translation in EN

of their implementation of the

definition in national legislation

Spain

La fecha de la recepcion de la

notificacion del acto de liquidación

The date on which the taxpayer

receives the tax assessment notice or

equivalent [that reflects the transfer

pricing adjustment]

Sweden

“Grundläggande beslut om årlig

  taxering”

 

“Omprövningsbeslut”

 

“Eftertaxering”

The date of sending of:

 

• the basic decision on the

  annual taxation;

 

• the re-assessment decision; or

 

• the additional assessment.

 

[In Sweden the relevant decision

would be the first decision of the tax

authorities that results or is likely to

result in double taxation, e.g. due to a

transfer pricing adjustment]

United

Kingdom

Whichever is the more appropriate

of the date of issue of:

 

• a statutory notice required to

  conclude an assessment and

  related appeal procedures for the

  period in question; or

 

• a letter of acceptance by an

  officer of the Board to

  settlement terms for the period

  in question

 

Czech

Republic

Doručení prvního platebního

výměru nebo jiného rozhodnutí,

které vede ke dvojímu zdanění.

The date on which the taxpayer

receives the first tax assessment

notice or equivalent that results in

double taxation

Malta

Id-data tan-notifika ta’ l-istima.

The date of the service (receipt) of

the notice of assessment [reflecting

the transfer pricing adjustment]

Poland

Dzień, w którym podatnik otrzyma

decyzję o wymiarze podatku

powodującą powstanie podwójnego

opodatkowania

The date on which the taxpayer

receives the tax assessment notice or

equivalent that results in double

taxation

Slovakia

Doručenie protokolu o daňovej

kontrole sa považuje za úkon

smerujúci na vyrubenie dane."

The delivery (receipt) of the record

(protocol) from the tax inspection is

referred as the action resulting in the

tax assessment.

 

 

 

 

 

 

 

 

 

 

 



[1]     “Company Taxation in the Internal Market” Commission staff working paper,

SEC(2001) 1681 23.10.2001.

[2]     “Communication from the Commission to the Council, the European Parliament and the Economic and

Social Committee: Towards an Internal Market without tax obstacles – A strategy for providing

companies with a consolidated corporate tax base for their EU-wide activities”

COM(2001) 582 final, 23.10.2001.

[3]       http://europa.eu.int/comm/taxation_customs/taxation/company_tax/transfer_pricing.htm

[4]     Convention 90/436/EEC of 23 July 1990, on the elimination of double taxation in connection with the

adjustment of profits of associated enterprises OJ L 255, 20.8.1990, p. 10-24.

[5]     Convention 90/436/EEC of 23 July 1990 on the elimination of double taxation in connection with the

adjustment of profits of associated enterprises, OJ L 255, 20.8.1990, p. 10-24.

[6]     The tax authority Member from Italy considers "the date of the first tax assessment notice or equivalent

reflecting a transfer pricing adjustment which results, or is likely to result, in double taxation within the

meaning of Article 1” as the starting point of the three-year period, since the application of the existing

Arbitration Convention should be limited to those cases where there is a transfer pricing “adjustment”.

[7]     The tax authority Member from the UK is in favour of deleting the reference to the two-year period

since Ministers sitting in the Council may not be in a position to deliver such commitment if it depends

on action by their legislature and procedures could be completed in significantly less than two years and

it could be unhelpful to suggest that two years might be an acceptable norm.

[8]     The tax authority Member from Italy considers “the date of the first tax assessment notice or equivalent

reflecting a transfer pricing adjustment which results or is likely to result in double taxation within the

meaning of Article 1” as the starting point of the three-year period, since the application of the existing

Arbitration Convention should be limited to those cases where there is a transfer pricing “adjustment”.

 

[9]     The tax authority Member from the UK tax authorities is in favour of deleting the reference to the twoyear

period since Ministers sitting in the Council may not be in a position to deliver such commitment if

it depends on action by their legislature and procedures could be completed in significantly less than

two years and it could be unhelpful to suggest that two years might be an acceptable norm.

 

[10]    The definition does not apply to requests according to Article 25 (1) of the OECD Model Tax

Convention, as the relevant "action" triggering the starting point of the three-year period could be other

than a transfer pricing adjustment.

 

 

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