European finance ministers have agreed a draft directive to improve the EU’s double taxation dispute resolution mechanisms. The directive will make these mechanisms mandatory and binding, with clear time limits for reaching agreement. The original proposal formed part of a corporate tax reform package proposed by the Commission in October 2016. The European Parliament must now give its opinion on the directive.
The directive allows for a ‘mutual agreement procedure’ to be initiated by the taxpayer, under which member states must reach an agreement within two years. If this fails, an arbitration procedure is triggered to resolve the dispute within specified timelines. This procedure will involve the appointment of a panel of three to five independent arbitrators, together with up to two representatives of each member state. The panel’s opinion will be binding unless the parties agree on an alternative solution.
Some aspects of the original proposal were revised, including:
the possibility of excluding disputes that do not involve double taxation;
arbitrators must not be employees of tax advice companies or have given tax advice on a professional basis;
the panel chair must be a judge; and
the possibility of setting up a permanent standing committee to deal with dispute resolution cases if member states so agree.
Once the EU Parliament has given its opinion, member states will have until 30 June 2019 to transpose the directive, which will apply to complaints submitted after that date on questions relating to the tax year starting on or after 1 January 2018, unless member states agree to include complaints related to earlier tax years.
European finance ministers have agreed a draft directive to improve the EU’s double taxation dispute resolution mechanisms. The directive will make these mechanisms mandatory and binding, with clear time limits for reaching agreement. The original proposal formed part of a corporate tax reform package proposed by the Commission in October 2016. The European Parliament must now give its opinion on the directive.
The directive allows for a ‘mutual agreement procedure’ to be initiated by the taxpayer, under which member states must reach an agreement within two years. If this fails, an arbitration procedure is triggered to resolve the dispute within specified timelines. This procedure will involve the appointment of a panel of three to five independent arbitrators, together with up to two representatives of each member state. The panel’s opinion will be binding unless the parties agree on an alternative solution.
Some aspects of the original proposal were revised, including:
the possibility of excluding disputes that do not involve double taxation;
arbitrators must not be employees of tax advice companies or have given tax advice on a professional basis;
the panel chair must be a judge; and
the possibility of setting up a permanent standing committee to deal with dispute resolution cases if member states so agree.
Once the EU Parliament has given its opinion, member states will have until 30 June 2019 to transpose the directive, which will apply to complaints submitted after that date on questions relating to the tax year starting on or after 1 January 2018, unless member states agree to include complaints related to earlier tax years.
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