INTERPRETING THE NEW EU TAX DISPUTE RESOLUTION DIRECTIVE
From today, resolving tax disputes will be a lot easier”. These are the words of European Union (EU) Commissioner for Economic and Financial Affairs Pierre Moscovici – spoken on 1 July 2019, the day the EU’s Directive on tax dispute resolution (2017/1852) came into force.
The intention of the new directive is 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.
According to EU figures, there are 2000 tax disputes currently pending between Member States that can arise from the interpretation and application of international agreements and conventions providing for the elimination of double taxation. Of these, around 900 are over two years old and are estimated to be worth €10.5bn.
Double taxation occurs when two or more countries claim the right to tax the same income or profits of a company or person. Such a scenario can arise from a mismatch between national rules of different jurisdictions or divergent interpretations of the same provision in a bilateral tax treaty. Until 1 July, there had only been a multilateral convention that gave tax authorities the possibility to submit a dispute to arbitration, but limited to transfer pricing adjustments, i.e., the EU Arbitration Convention on Transfer Pricing. As for disputes under double tax treaties, there were no means for taxpayers to trigger such a process.
Jan-Mar 2020 issue
Fraser Tennant