New EU-wide system to resolve tax disputes between Member States

New EU rules enter into force on 1 July 2019 to ensure quicker and more effective resolution of tax disputes between Member States, making life easier and offering much more tax certainty for businesses and individuals experiencing double taxation issues. The awaited new system will help to find solutions for tax disputes between Member States that can arise from the interpretation and application of international agreements and conventions providing for the elimination of double taxation. Estimates show that 2000 such disputes are currently pending in the EU, out of which around 900 are over 2 years old.

Taxpayers facing tax disputes can now initiate a mutual agreement procedure whereby the Member States in question must try to resolve the dispute amicably within two years. If no solution has been found at the end of this 2-year period, the taxpayer can request to set up an Advisory Commission to deliver an opinion. If Member States fail to do this, the taxpayer can bring an action before its national court and force Member States to act. Such Advisory Commission will be comprised of three independent members appointed by the Member States concerned and representatives of the competent authorities in question. It must deliver an opinion within 6 months, which the Member States concerned must carry out unless they agree on another solution within 6 months following the opinion.

If the decision is not implemented, the taxpayer who has accepted the final decision and renounced his right to domestic remedies within 60 days from notification may seek to enforce its implementation before the national courts. Member States are obliged to notify taxpayers and publish the full final decision or an abstract.

The new directive applies to complaints submitted from 1 July 2019 onwards, relating to questions of dispute in matters of income or capital earned in a tax year commencing on or after 1 January 2018. The competent authorities can also agree to apply the directive to any complaint submitted prior to that day or to earlier tax years.

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