Taxes
6 August 2019

One step closer to efficient resolution of disputes arising from interpretation of double taxation treaties

The governmental bill on international cooperation in resolution of tax-related disputes in the EU has been submitted to the Chamber of Deputies. The bill responds to the necessity to implement the EU Directive on tax dispute resolution mechanisms in the EU (DRM Directive).

Václav Baňka
Josef Riesner

The directive follows the long-term effort for efficient resolution of disputes arising from the interpretation of double taxation treaties on a national and international level. While tax treaties usually contain a clause on dispute resolution by mutual agreement or the Arbitration Convention, such procedures are rather time-consuming, and their outcome uncertain. The proposed legislation lays down clear rules, and brings new legal remedies to taxpayers.

The main pillar of the directive being implemented and the governmental bill is a broadening of the scope of disputes to be governed by these rules. The new legal regulation will apply to any disputes arising from the interpretation of double taxation treaties between the member states of the EU or the Arbitration Convention. The disputes will be resolved by a harmonised procedure concluded by a report on the final outcome.

For the parties to the proceedings, the law stipulates specific time limits to complete each individual phase of the proceedings. Taxpayers affected may initiate the harmonised procedure with an application to be filed no later than within three years of the date when they learned of the measure leading to the ‘question of dispute’. The authority competent to resolve the issue shall decide on its admissibility and initiate the harmonised procedure within 6 months from receiving the application. The time limit for the competent authority to assess the matter and reach an agreement is two years. For serious reasons, this time limit may be extended by a maximum of one year. If no agreement is reached, the question will be considered by an advisory authority, whose conclusions must be reflected by the competent authorities within 6 months.

Apart from setting clear and legally enforceable time limits, the bill enhances the transparency of dispute resolutions by introducing the duty to publish the decisions issued. The report of the outcome of the harmonised procedure may only be published with the consent of all parties, and upon the agreement of the competent authorities. Yet, there is also an option to publish a summary report, in an anonymised form not containing taxpayers’ sensitive data, while containing the main conclusions of the resolved dispute. Decisions must be sent for publication to the European Commission, which has to keep records of all decisions issued, archive them and publish them on its website.

The application of the bill in terms of time is stipulated in its transitory provisions: It shall not apply to ‘questions of dispute’ concerning taxable periods commencing before 1 January 2018.

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