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European Commission Published Proposal to Strengthen Double Taxation Dispute Resolution

Tax Development Oct 25, 2016

European Commission Published a Proposal to Strengthen the Double Taxation Dispute Resolution Mechanism in the EU

On October 25, 2016, the European Commission (EC) published a council directive proposal to strengthen existing mechanisms and resolve double taxation disputes between member states (MS).

The procedural stages are left untouched and still consist of the following three stages:

  1. Complaint stage - any taxpayer subject to double taxation is entitled to submit a complaint requesting the resolution of the double taxation to each of the competent authorities of the member states concerned;
  2. Mutual Agreement Procedures (MAP) stage - competent authorities of the member states concerned shall endeavor to eliminate the double taxation by mutual agreement procedure within two years;
  3. Advisory Committee - where competent authorities have not reached an agreement, an Advisory Committee will be set up within 50 days. The Advisory Commission shall deliver its opinion no later than six months after the date it was set up.

The following elements have now changed or are now included:

  • If competent authorities reject a taxpayer’s complaint, the taxpayer shall be entitled to appeal against this decision in accordance with national rules.
  • If an Advisory Commission is not set up within 50 days, taxpayers may refer to a competent national court to appoint independent persons to appoint a chair for the Advisory Commission;
  • The scope of complaints has broadened to all cross-border situations subject to double income tax, including PEs with a head office located in third countries;
  • Member states concerned may deny access to the dispute resolution procedure in cases of tax fraud, wilful default and gross negligence;
  • The competent authorities may agree to set up an Alternative Dispute Resolution Commission instead of the Advisory Commission to deliver an opinion on the elimination of the double taxation; and
  • The Commission is allowed to assist member states in proceedings. Among other, The Commission shall make available online and keep up to date a list of the independent persons which can be appointed as chair.

The proposals need to be approved unanimously by all member states with the aim for member states to incorporate these rules by December 31, 2017 into their local legislations. It is likely the proposal will be accepted and approved by the member states.