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EU: Tax dispute resolution system effective 1 July 2019

EU: Tax dispute resolution system effective 1 July 2019

The European Commission today issued a reminder that new EU rules are effective today. The EU rules are to provide for quicker and more effective resolution of tax disputes between EU Member States, thus allowing greater tax certainty for businesses and individuals experiencing double taxation issues.

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As noted in the EC release, the tax dispute resolution directive will allow businesses and individuals to resolve disputes related to tax treaties more swiftly and effectively, in particular those related to double taxation. The new directive introduces more transparency concerning tax disputes in the EU.

The new directive on tax dispute resolution mechanisms imposes a duty on EU Member States to make 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 EU 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 the EU Member States fail to do this, the taxpayer can bring an action before its national court and force the EU Member States to act.
  • This Advisory Commission will be comprised of three independent members appointed by the EU Member States concerned and representatives of the competent authorities in question. It must deliver an opinion within six months (unless the EU Member States agree to another solution within the six months following the opinion).
  • If the decision is not implemented, the taxpayer that has accepted the final decision and renounced its right to domestic remedies within 60 days from notification may seek to enforce its implementation before the national courts. EU Member States are obliged to notify taxpayers and publish the full final decision or an abstract.

The new directive applies to complaints submitted beginning from 1 July 2019 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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