On May 23, 2017 the Council of the European Union issued a press release announcing that during its meeting of May 23, 2017 the Economic and Financial Affairs Council (ECOFIN) agreed on a Presidency compromise for a Proposal for a Council Ditrective on Tax Dispute Resolution Mechanisms in the European Union.

 

The proposal sets out to improve the mechanisms used for resolving disputes between Member States when disputes arise from the interpretation of agreements on the elimination of double taxation. It builds on convention 90/436/EEC on the elimination of double taxation in connection with the adjustments of profits of associated enterprises.

 

The draft directive requires dispute resolution mechanisms to be mandatory and binding, with clear time limits and an obligation to reach results.

 

The text allows for a 'mutual agreement procedure' to be initiated by the taxpayer, under which Member States must reach an agreement within two years. If the procedure fails, an arbitration procedure is launched to resolve the dispute within specified timelines. For this, an advisory panel of three to five independent arbitrators is appointed together with up to two representatives of each Member State. The panel ('advisory commission') issues an opinion for eliminating the double taxation in the disputed case, which is binding on the Member States involved unless they agree on an alternative solution.

 

During its meeting of may 23, 2017 the ECOFIN endorsed a compromise reached on the following issues:

·   Scope of the directive, i.e. the types of disputes that should be covered. ECOFIN agreed on a broad scope but with the possibility, on a case-by-case basis, of excluding disputes that do not involve double taxation;

·   'Independent persons of standing': criteria to ensure the independence of those appointed to a pool of independent arbitrators. It was agreed that arbitrators must not be employees of tax advice companies or have given tax advice on a professional basis. Unless agreed otherwise, the panel chair must be a judge;

·   Standing committee: the possibility of setting up a permanent structure to deal with dispute resolution cases if Member States so agree.

 

Next steps

The Council will adopt the Directive once the European Parliament has given its opinion.

 

Member States will have until June 30, 2019 to transpose the directive into national laws and regulations. It will apply to complaints submitted after that date on questions relating to the tax year starting on or after January 1, 2018. The Member States may however agree to apply the directive to complaints related to earlier tax years.

 

Click here to be forwarded to the text of a Presidency compromise for a Proposal for a Council Directive on Tax Dispute Resolution Mechanisms in the European Union as agreed upon by ECOFIN on May 23, 2017.

 

Click here to be forwarded to the Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (90/436/EEC) as available on EUR-Lex.

 


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