Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.
By Joe Kirwin
Malta, in its role as rotating president of the European Union, is proposing changes to the pending EU Double Taxation Dispute Resolution Mechanisms Directive that would require arbitrators of tax disputes to be certified judges and eliminate references to the OECD multilateral instrument and the OECD Model Tax Convention.
The Maltese presidency also has a new list of definitions, including for permanent establishments, in response to calls for the expansion of the scope of the directive to cover more than just business taxation and disputes involving countries with bilateral tax treaties.
Some EU countries have raised concerns about the independence of “persons of standing” that will make double taxation dispute decisions in panels such as an advisory commission or alternative dispute resolution mechanism. In response, Malta proposed that only certified judges be allowed to serve.
“The Maltese presidency considers that there is merit in the suggestion made by some member states that the independent persons of standing should be judges in order that independence is truly maintained,” according to confidential documents drawn up by the Maltese presidency and seen by Bloomberg BNA.
Malta also proposed that the judges be from any EU member state and not necessarily from the country where an advisory commission or alternative dispute resolution commission is formed.
Denmark led the move for a clarification about arbitrators needing to be qualified judges, insisting that the European Commission proposal was insufficient.
“It should be a requirement that these persons are employed as full-time judges in a member state,” said a Danish submission to the Council of Ministers, a copy of which was seen by Bloomberg BNA. “This ensures sufficient independence—not only from the competent authorities involved and any specific taxpayers in the case that is to be assessed but also for business interests as well.”
The same Danish paper also recognized that some EU countries are opposed to using some of the double taxation solutions developed by the Organization for Economic Cooperation and Development and that they are reluctant to agree to mandatory binding arbitration under the multilateral instrument developed by the OECD.
As a result of the concerns about OECD approaches, the Maltese presidency called for references to the OECD Model Tax Convention to be removed from Article 13 in the proposal that deals with opinions of either the advisory commission or alternative dispute resolution commission set up to resolve a tax dispute.
Despite the removal of the references to the OECD, a European Commission official, speaking on the condition of anonymity to Bloomberg BNA, insisted the deletion didn’t weaken the proposal. “The reference to the OECD Model Tax Convention in Article 13 of the directive is ancillary to one key objective, which is to have effective dispute resolution mechanisms based on an obligation of result in place including in situations where no double tax treaties are in force between member states.”
The same official said the “removal would not weaken the proposal” provided EU memeber countries “agree on the modus operandi to solve double taxation disputes.”
Pascal Saint-Amans, the director for the OECD Center for Tax Policy and Administration, concurred that removing references to the OECD Model Tax Convention or the multilateral instrument isn’t a concern.
“The important thing is that there are different mechanisms allowed under the proposal and solutions can be reached quickly,” Saint-Amans told Bloomberg BNA March 30.“What would be bad is if they restricted the proposal to current mechanisms such as the EU Arbitration Convention. But that has not happened.”
The European Commission proposed the Double Taxation Dispute Resolution Directive in October of 2016. The proposal details multiple ways to resolve double-tax disputes that go beyond the EU Arbitration Convention, which is limited to transfer pricing issues. The pending proposal calls for mandatory binding arbitration that is applied to decisions made by either the advisory commission or the alternative dispute resolution mechanism.
EU countries are divided over the scope of the directive as well as the competence of judges. The Maltese presidency has proposed that the directive cover all double-tax disputes and not be limited to business taxation or to disputes between EU countries that have bilateral tax treaties. As a result, Malta has outlined new definitions for businesses, including permanent establishments, that would qualify for dispute resolution.
However some countries are resisting expansion of the proposal to cover disputes beyond those involving countries with bilateral treaties.
Negotiations on the Double Taxation Dispute Mechanisms Directive in the Council of Ministers will continue in the coming months and Malta hopes to reach an agreement by June 30, the end of its presidency.
The European Commission estimates that there are more than 200 outstanding double-tax disputes in the EU involving sums in excess of $1 billion.
To contact the reporter on this story: Joe Kirwin in Brussels at firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)