European Union renewed dispute settlement mechanism for double taxation

In the field of the double taxation there are several international conventions regulating dispute settlement, such as the rules for the Mutual Agreement Procedure (MAP), however, there are often debates among the EU Member States. On 10 October 2017, the Council adopted new rules to better resolve tax disputes, which should be transposed by the Member States until 30 June 2019. These new provisions will ensure that businesses and citizens can resolve disputes related to the interpretation of tax treaties more swiftly and effectively. In particular, a wider range of cases will be covered (i.e. the scope has been extended to all tax disputes derived from tax treaties or international agreements) and EU Member States will now have clear deadlines to take conclusive and enforceable decisions. If they do not act accordingly, national courts will decide on the case.

According to the directive, the taxpayers faced with tax treaty disputes can initiate a procedure whereby the Member States in question must try to resolve the dispute amicably within two years. If, at the end of this period, no solution has been reached, or the complaint has been rejected by the concerned Member State, the Member States must set up an Advisory Commission to arbitrate. The Advisory Commission has 6 months to deliver a final decision, and subsequently the Member States have another 6 months to settle the dispute. If they are unable to do so, the delivered decision becomes legally binding. If Member States fail to do this whole procedure, the taxpayer can bring an action before the national court to proceed.

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