According to EU figures there are currently 2,000 tax disputes pending between Member States, and approximately 900 of them are over two years old. The Council Directive on tax dispute resolution mechanisms in the EU (2017/1852) came into force on 1 July 2019 and aims to resolve this problem by putting a legal duty on Member States to take binding decisions.
Companies and individuals facing tax disputes that arise from bilateral tax agreements or conventions that provide for an elimination of double taxation can now initiate a mutual agreement procedure, where the Member States have to resolve the dispute within two years. If the dispute is not resolved within the two-year period, the companies or individuals involved in the dispute can request the formation of an Advisory Committee to arbitrate and deliver an opinion. If Member States fail to do so, the companies or individuals can bring an action before the national courts and force the Member States to act.
The Advisory Committee will consist of three independent members appointed by the Member States and representatives of the competent authorities in question, which has to deliver a final and binding opinion within six months. This decision will be immediately enforceable and must resolve the dispute, unless the Member States agree to another solution within the six months following the opinion.
If the opinion is not implemented, the companies and individuals who accepted the final decision and waived their right to domestic remedies within 60 days from the notification of the opinion, can enforce its implementation before the national courts. Member States are obliged to notify the companies and individuals involved in the dispute and publish abstracts of the final decisions.
The Directive applies to complaints submitted by companies or individuals from 1 July 2019 onwards on disputes concerning income or capital related to a taxable period commencing on or after 1 January 2018.