EU Council approves new cross-border tax dispute resolution plan

As expected, the ECOFIN Council today approved a directive establishing a new system for resolving double taxation disputes between EU member states.

The new directive on tax dispute resolution follows an agreement reached by EU nations on May 23. It was approved without discussion. Member states will have until June 30, 2019, to transpose the directive into national laws and regulations.

“This new system is a big improvement. It will encourage investment by creating a more favourable tax environment and reducing costs for businesses,” said Toomas Tõniste, minister for finance of Estonia, which currently holds the Council presidency.

The directive strengthens the mechanisms used to resolve disputes between member states that arise from the interpretation of agreements on the elimination of double taxation. Under the EU agreement, taxpayers are permitted to initiate a mutual agreement procedure and member states are given two years to reach an agreement to resolve the dispute.

The new arrangement calls for an arbitration procedure if the mutual agreement procedure fails which will result in a decision that is binding on the member states. The arbitration will be conducted by an advisory panel comprised of three to five independent arbitrators and up to two arbitrators appointed by each member state involved. The arbitrators may not be employees of tax advisory companies or have given tax advice on a professional basis.

The compromise text allows states to exclude disputes that do not involve double taxation on a case-by-case basis. The agreement also allows for the possibility of setting up a more permanent structure, called a standing committee, to deal with dispute resolution cases if Member States agree.

The Commission also presented at the meeting a package of proposals to reform the EU’s VAT system as well as its suggested policy approach to the taxation of the digital economy.

Be the first to comment

Leave a Reply

Your email address will not be published.