European Commission gets go-ahead to improve tax dispute rules

The European Commission has been granted permission from EU member states to introduce rules to improve tax dispute resolution as well as cover issues relating to double taxation which can be a major obstacle for businesses

The decision to create new rules to resolve tax disputes, taken by EU finance ministers at the ECOFIN Council meeting in Luxembourg, will ensure that businesses and citizens can resolve disputes related to the interpretation of tax treaties quickly and effectively.

The improvements to the current rules will result in a wider range of cases being covered and member states will be given clear deadlines to agree on a solution. Member states will also have a legal duty to take conclusive and enforceable decisions, if they do not national courts will.

The new rules will ensure that taxpayers faced with tax treaty disputes can initiate a procedure whereby member states must try to resolve the dispute within two years. If at the end of two years no solution has been found, an Advisory Commission has to be set up to come to a decision.

The Advisory Commission will include three independent members and representatives of the competent authorities in question and will have six months to deliver a final decision.

Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, said: ‘We proposed this new system to improve legal certainty and EU competitiveness by creating a binding obligation on member states' authorities to resolve tax disputes in a timely manner.

‘This is an important step to allow EU citizens and businesses alike to have fair tax treatment. I commend the quick action of member states and the European Parliament to support this upgrade of the current rules.’

It is estimated that there are currently 900 double taxation disputes in the EU, worth €10.5 billion. Double taxation refers to cases where two or more countries claim the right to tax the same income or profits of a company or person. It can occur due to a mismatch in national rules or different interpretations of a bilateral tax treaty with regards transfer pricing arrangements.

Report by Amy Austin

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