New proposals for double taxation agreements in EU

Issued by the CFE Fiscal Committee. Republished from IAFEI Quarterly bulletin June 2020.

CFE welcomes the Commission’s intention to expand and improve the mechanisms available to member states to resolve double taxation disputes with the introduction of Council Directive No. 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union.

CFE Commented on this matter in the context of the OECD BEPS consultation process in April 2016 and when the proposed Directive On Double Taxation Dispute Resolution Mechanisms were subject to public consultation in May 2017. This opinion statement complements these previous opinion statements.


Double taxation impedes the ability of entrepreneurs operating cross border to develop their business and consequently decreases the competitiveness of the single market. Easily accessible, efficient and effective dispute resolution mechanisms are a crucial element in achieving fair and effective taxation within the single market. At present, there are a large number of outstanding cases, in addition, more comprehensive audits by tax authorities are increasing the number of such cases. These developments make the implementation of a properly functioning dispute resolution mechanism crucial.

In general, CFE welcomes this directive and use it as a positive development. several aspects which CFE especially appreciates were summarized in CFE’s opinion statement FC 4/2017 on the proposed Directive On Double Taxation Dispute Resolution Mechanisms in the EU issued in May 2017, including, inter alia, its extended scope compared to the EU Arbitration Convention, increased efficiency and effectiveness in the process, and higher tax certainty as a result.

Given that the purpose of the directive is to facilitate resolution of disputes which arise from the interpretation and application of agreements and conventions that provide for the elimination of double taxation, it appears to the CFD that the scope should also cover the EU directives in the field of taxation, since different application an interpretation of these directors by member states may result in disputes and double taxation. CFE also wishes to draw attention to the fact that the wording of the second sentence of Article 2 (2) May cause difficulties in resolving tax disputes under the mechanisms of the directive. The wording does not determine the member state whose laws should prevail in giving definitions to the terms involved. While this article follows closely article 3(2) of the OECD Model Taxation Convention it is not clear whether the interpretation and guidance provided in the commentaries to the OECD Model Taxation Convention should be, or would be, adopted by the member states, particularly those that are not members of the OECD.

Comments on procedures under directive

CSE in particular appreciates that the directive expands the existing mechanisms for taxpayers under previously available possibilities by broadening the scope of disputes that could be settled, streamlining the process and addressing some of the shortcomings. Consequently, CFE considers the directive to be a positive development.

In spite of the overall positive developments, there are nevertheless outstanding issues that, in CFE’s view, merit further consideration. To that end , CFE is setting out its views on the matter hoping that these comments will be helpful in any future revisions of the directive or in other developments in the resolution of tax disputes.

Length of dispute resolution process

The positive development for taxpayers and for tax certainty generally is that the directive introduces a stipulation for the mandatory resolution of income tax disputes subject to a strict and enforceable timeline.

In spite of such a strict timeline, the dispute resolution process under the directive could still take up to five years period such a length of time for the proceedings, in particular from a taxpayer’s POV, does not represent an effective dispute resolution process. if the process under the directive is reviewed with A view to making changes, it should be amended so the binding resolution is achieved within two to three years at most.

Taxpayers’ role and rights

the directive entitles the taxpayer to initiate the proceedings. CFE observes that under the directive, the taxpayers rights are broader than rights available under other tax dispute resolution mechanisms, such as the MAP procedure or under the EU Arbitration Directive. These additional rights include, for example, that taxpayers will be notified of the terms of reference of the dispute, the proposed timeframe for completion and the terms of conditions of the involvement of third parties.

However, the closer involvement of the taxpayer in the process would increase tax certainty and trust of taxpayers in these types of dispute resolution Procedures. An example could be the taxpayer being entitled to propose or submit evidence, and/or their more active participation in the process.

Creation of Advisory Commission or an Alternative Dispute Resolution Commission

CSE welcomes the flexibility that the directive offers in the form of an option between the advisory Commission or the alternative dispute resolution Commission. Such flexibility can simplify and accelerate the dispute resolution process.

One of the crucial elements of an effective and efficient dispute resolution process is transparency in the selection of the persons who are decision-makers, IE arbitrators or members of committees whose decision will be the basis for final resolution of the dispute.

Therefore, see if he believes that a more transparent process of selection of members of the Commission should be considered. In addition, the right of the concerned taxpayer to file an objection against the member of the Commission that they consider is not an impartial independent member could increase the trust of the taxpayer into the transparency of the whole process.

Lack of independent persons of standing

CFE agrees that any person elected as a member of any of the commissions should be experienced and knowledgeable, as well as fully independent and impartial from the parties involved in the particular case. On the other hand, see if he notes that the criterion listed in Article 8, 4 (d) D is so strict that it could be a serious problem identifying a suitable person in some countries, in particular in those countries where the judges are not allowed to perform activities other than judicial activities. Needless to say, those persons suitable to be members of these commissions should have solid knowledge in the field of international taxation. CFE therefore strongly suggests reconsidering the necessity of the criterion stated in Article 8, 4 (d) of the Directive.

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