Directive on Tax Dispute Resolution Mechanisms in the EU

Deloitte Malta Tax Alert

ECOFIN agrees on the proposal

On 23 May 2017, the Economic and Financial Affairs (‘ECOFIN’) Council under the Maltese Presidency reached an agreement on a Proposal for a Council Directive on Tax Dispute Resolution Mechanisms in the European Union (the ‘Proposal’).

The Proposal sets out to improve the mechanisms used for resolving disputes between Member States when disputes arise from the interpretation of agreements on the elimination of double taxation. Building on the EU Arbitration Convention (90/436/EEC), the Proposal aims to broaden the scope to areas which are not currently covered by the said EU Arbitration Convention and to add targeted features to address the main shortcomings identified therein, such as enhancing enforceability and effectiveness of this mechanism.

It requires dispute resolution mechanisms to be mandatory and binding, with clear time limits and an obligation to reach results.

The text allows for a 'mutual agreement procedure' to be initiated by the taxpayer, under which member states must reach an agreement within two years. If the procedure fails, an arbitration procedure is launched to resolve the dispute within specified timelines. For this, an advisory panel of three to five independent arbitrators is appointed together with up to two representatives of each member state. The panel (the 'advisory commission') issues an opinion for eliminating the double taxation in the disputed case, which is binding on the Member States involved unless they agree on an alternative solution.

Further steps

The Council will adopt the Directive once the European Parliament has given its opinion.

MSs will be required to transpose the directive into national laws and regulations before 30 June 2019.

It will apply to complaints submitted after that date on questions relating to the tax year starting on or after 1 January 2018. However, the Member States may agree to apply the directive to complaints related to earlier tax years.


The ECOFIN Council Press Release can be found here.

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