On Tuesday 23 May 2017 the Council reached an agreement on the future adoption of the Council Directive on Double Taxation Dispute Resolution Mechanisms in the European Union (the Directive). Once the European Parliament has given its opinion on the Directive and the Council has given its final vote, the Directive will apply to any complaint submitted from 1 July 2019 onwards with respect to those questions related to a tax year starting on or after 1 January 2018. See also our earlier Flash on this topic.

The Directive introduces improvements to the existing mechanisms intended to resolve disputes between Member States on the interpretation of bilateral tax treaties. The Directive makes dispute resolution mechanisms binding and mandatory. Additionally, the Directive introduces time limits and obliges Member States to resolve disputes related to double taxation.The Directive will result in more legal certainty in that it guarantees final and binding decisions for any dispute.

The Directive enables any affected company to submit a complaint to the competent authorities of Member States. Such a complaint can lead to a mutual agreement procedure. If mutual agreement is not reached within two years, a mandatory arbitration procedure will be launched. In this procedure an officially appointed advisory commission will issue a binding opinion.

We expect the Directive to result in a reduction of time needed to resolve cross border disputes. We will keep you informed on any further developments.