EU Framework for resolving double tax disputes

The EU Economic and Financial Affairs Council has adopted a Directive to create a new system to resolve double taxation disputes between EU Member States. This measure will afford taxpayers a transparent process with clear deadlines applicable to tax authorities involved to resolve cross-border double tax disputes within the EU.

The new Directive will allow taxpayers to submit a complaint concerning a double taxation dispute to a competent tax authority in each of the EU Member States concerned. The competent authorities will have six months to decide whether to accept the complaint. Once the complaint is accepted, the competent authorities involved will have two years (which can be extended by an additional year) to resolve the dispute using the mutual agreement procedure. Once this period has lapsed without resolution, the taxpayer or the competent authorities can request for the dispute to be heard before an advisory commission (the “Commission”). The Commission will be formed by a chair, up to two independent arbitrators, and a maximum of two representatives from each EU Member State. The Commission then has six months to notify the competent authorities of its resolution for the matter, which must be implemented within six months.

Proposals for a Council Directive on Double Taxation Dispute Resolution in the EU was initially compiled in October 2016 as part of the European Commission’s Corporate Tax Reform Package. EU Member States will have to implement the Directive into national law by 30 June 2019.

The Directive is expected to provide a definite time frame for resolving cross-border double tax disputes thereby reducing costs for business.

The full text of the Directive may be accessed here.