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New EU Rules for Resolving Treaty Disputes

New EU Rules for Resolving Treaty Disputes

The EU is introducing new rules for resolving bilateral tax disputes.


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They set firm time limits and have a wide scope. Under the rules, taxpayers can now expect a resolution to their dispute within two years. If, after that time, a taxpayer can't reach a solution with the EU member states they have had a dispute with, those states must set up an advisory commission to arbitrate. The commission will have six months to deliver their final binding decision, which will immediately be enforceable and must resolve the dispute. If the EU member states do not set up this advisory commission, the taxpayer can bring an action before the national court.

This new process must be implemented into domestic legislation by June 30, 2019.

Improving dispute-resolution mechanisms is an integral part of the OECD's BEPS project and, under BEPS Action 14, the OECD resolved to strengthen its existing processes' effectiveness. One of the measures under BEPS 14, which was intended to ensure consistent and proper implementation of tax treaties, was to develop a minimum standard for resolving treaty-related disputes.

The EU Commission launched a consultation in February 2016, looking at how to improve tax-dispute resolution within the EU-specifically, the existing mechanism of bilateral treaties, supported by the European Arbitration Convention (EAC), which had significant gaps. (The EAC only applies to transfer pricing disputes and attribution of profits to permanent establishments; it does not address disputes over whether a permanent establishment exists, nor issues that involve re-characterizing transactions.)

For more information, contact your KPMG adviser.

Information is current to November 21, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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