Czech Business Today

One of the main problems that cross-border operating businesses currently face is double taxation. There are already mechanisms in place that deal with the resolution of double taxation disputes. Although these work well in many cases, there is a need to make them work better regarding access for taxpayers to those mechanisms, coverage, timeliness and conclusiveness.

The proposed directive builds on the existing Union Arbitration Convention, which already provides for a mandatory binding arbitration mechanism, but broadens its scope to areas which are not currently covered and adds targeted enforcement blocks to address the main identified shortcomings, as regards enforcement and effectiveness of this mechanism. The proposal would broaden the scope of dispute resolution mechanisms to all cross-border situations subjected to double income tax imposed on business profits and adds an explicit obligation of result for Member States as well as a clearly defined time-limit.

The Directive allows for a Mutual Agreement Procedure under which the Member States shall freely cooperate and reach an agreement within two years. If the MAP fails, it automatically leads to a dispute resolution procedure with the issuance of a final mandatory binding decision by the competent authorities of the Member States involved. The competent authorities may publish the final arbitration decision and more detailed information, subjected to agreement by the taxpayer. The EESC agrees with the Commission that double taxation is one of the biggest tax obstacles to the Single Market. But eliminating the double taxation is not by itself sufficient to create a level playing field in the area of taxation. The proposed directive adds targeted enforcement blocks to address the main identified shortcomings in the Union Arbitration Convention. In circumstances where Member States do not automatically start the arbitration procedure, the taxpayer can ask its national court to take the necessary steps for setting up an arbitration committee to deliver a final, binding decision on the case within a fixed timeframe.

The Committee supports the Commission initiative to extend its monitoring of countries’ performance in all cases of double taxation disputes in cross-border situations on a yearly basis, in order to assess whether the objectives of the directive are met, and also welcomes the flexibility provided to Member States to agree bilaterally on a case-by-case basis to alternative dispute resolution mechanisms. This facilitates solutions in multilateral situations where the dispute at stake has to be solved not only at the EU level but also in relation to third countries through bilateral treaties.

Marie Zvolská
Group I – Employers EESC Member