New Germany-Switzerland tax arbitration agreement provides legal certainty

by Ninja-Antonia Reggelin

Germany’s Ministry of Finance on March 3 made public an agreement reached with Switzerland regarding the procedure for arbitration of tax disputes.

The 15-page consultation agreement, signed December 21, 2016, is meant to ensure uniform application and interpretation of Article 26 (5) to (7) of the German-Swiss tax treaty, including a protocol, signed October 2010, relating to arbitration.

While described as a consultation, it should not be understood as a consultation document within a legislative process. Rather, the agreement is based on para 25(3) of the OECD Model Tax Convention, which encourages competent authorities of the Contracting States to consult together for the elimination of double taxation in cases not provided for in the Convention.

The agreement applies to all arbitration proceedings initiated after the entry into force of the 2010 Germany-Switzerland protocol. It provides taxpayers with great legal certainty as it includes very detailed specifications regarding arbitration proceedings that involve the two countries.

The Germany-Switzerland tax arbitration agreement sets forth rules for the beginning, duration, and end of an arbitration procedure; a simplified arbitration procedure; specifications relating to applications for a bilateral advance pricing agreement; the composition of the members of the arbitration tribunal and their suitability; as well as the resulting costs.

Both competent authorities must submit an agreement proposal as well as an explanatory position paper to the arbitration tribunal within 60 days after appointment of the arbitration tribunal chairman.

The agreement specifies that the tribunal must come to a decision within 270 days after the appointment of the chairman by accepting one of the proposals for each specific matter of dispute.

Because each matter is dealt with individually, the final decision may consist of parts of each of the competent authorities’ proposals.

The agreement states that the arbitrators’ decision will be reached by majority vote. The written decision will not contain any reasoning or analysis, though.

The competent authorities must, within 120 days of the decision, release a notice of the tribunal decision to parties affected by the dispute. If a person directly affected by the case does not accept the final agreement within 60 days of the date of transmission, the agreement shall be deemed to be rejected.

Otherwise, the decision of the arbitration board shall be deemed to be settled by mutual agreement and becomes binding on both countries, the agreement provides.

Ninja-Antonia Reggelin

Ninja-Antonia Reggelin

Ninja-Antonia Reggelin is based in Berlin, where she is head of tax policy at a business association.

She previously worked at the OECD, contributing to the project that led to the publication of the BEPS Action Plan. Prior to that, she was with PwC Germany, where she focused on international tax structuring.

Ninja holds a Master’s degree (LL.M.) in International Trade Law from Bond University Australia and a Master’s degree (M.A.) in International Relations from the University of Kent Brussels School of International Studies.

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