This week marks the introduction of new EU rules designed to ensure quicker and more effective resolution of tax disputes between member states, in a push to offer more tax certainty for businesses and individuals experiencing double taxation issues
EU figures suggest there are 2,000 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 (£9.4bn).
A directive which came into force on 1 July aims to tackle this by placing a legal duty on member states to take conclusive decisions.
Taxpayers facing tax disputes that arise from bilateral tax agreements or conventions that provide for the elimination of double taxation 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 two-year period, the taxpayer can request the setting up of 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.
The 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 six months, which the member states concerned must carry out unless they agree to another solution within the six 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.
Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, said: ‘A fair and efficient tax system in the EU should also ensure that the same revenue is not taxed twice by two different Member States. When that happens, the problem should be solved swiftly and efficiently.
‘From today, resolving tax disputes will be a lot easier. Companies, in particular small businesses, and individuals that may be experiencing cash flow problems as a result of double taxation will see their rights considerably enhanced. They can now be more certain that their tax matters will be resolved by the relevant judicial authorities in an acceptable and predictable timeframe, instead of dragging on for years.’
By Pat Sweet