Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union

What it is

to establish an effective dispute resolution mechanism regarding double taxation for the proper functioning of the internal market. ROLE OF THE EUROPEAN PARLIAMENT: the Council adopts the act after consulting Parliament but without being obliged to follow the latter’s opinion. BACKGROUND: one of the main problems encountered by businesses operating across borders is double taxation. There are already mechanisms in place that deal with the resolution of double taxation disputes. These are the mutual agreement procedures that are provided in double taxation conventions (DTCs) entered into by Member States as well as in the Union Arbitration Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises. The Commission considers that these mechanisms should be improved with respect to access for taxpayers to those mechanisms, coverage, timeliness and conclusiveness. Moreover, the traditional methods of resolving disputes no longer fully fit with the complexity and risks of the current global tax environment. In its communication of June 2015 on an action plan for a fair and efficient corporate tax system in the EU, the Commission indicated that its proposal for a Common Consolidated Corporate Tax Base (CCCTB), which will be adopted on the same day as this proposal, is a major step towards a better tax environment for business. The Committee on Economic and Monetary Affairs adopted, following a special legislative procedure (Parliament’s consultation), the report by Michael THEURER (ALDE, DE) on the proposal for a Council directive on double taxation dispute resolution mechanisms in the European Union. The committee called on the European Parliament to approve the Commission proposal as amended. Double taxation represents one of the biggest obstacles to the Single Market as it creates barriers for cross-border investments. The report noted that attempts to eliminate double taxation have often led to "double non-taxation", where, through the practice of base erosion and profit shifting, companies have managed to have their profits taxed in those Member States which have corporate taxes of close to zero. That ongoing practice distorts competition. Furthermore, current dispute resolution procedures are too long, costly and often do not result in an agreement, with some cases receiving no acknowledgement at all. For this reason, it is essential that mechanisms available in the Union ensure an effective, rapid and enforceable resolution of double taxation disputes and the effective and timely elimination of the double taxation at stake, with regular and effective communication to the taxpayer. CCCTB : in order to shape a fair, clear and stable tax environment and to reduce taxation disputes within the internal market, at least some minimum convergence in corporate tax policies is required. Members considered that the introduction of a common consolidated corporate tax base (CCCTB) as proposed by the Commission is the most effective way of eliminating the risk of double corporate taxation. Stricter deadlines : the report stated that the competent authorities of the Member States…

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