The European Commission has proposed a Code of Conduct for all procedures under the Arbitration Convention with the object of avoiding double taxation on intra-community trade.
The EU Joint Transfer Pricing Forum has finished the first phase of its task with the presentation to the Commission of its suggestion for a Code of Conduct to be followed by member states when applying the Arbitration Convention. Its suggestion, which has now been endorsed by the Commission, is for the member states to adopt the Code during a Council meeting once the European Parliament has given its views. This would avoid the inevitable delays associated with finalising and the ratifying a legal act. The Forum has now turned to the next part of its project, the review of the documentation requirements in the various member states and of the scope for harmonisation.
The proposed Code of Conduct would require member states to apply the Arbitration Convention as follows:
- the three year period for the submission of an arbitration request shall run from the date of the assessment notice leading to the double taxation objected to
- the two year period for member states to attempt to reach amicable agreement without formally going to arbitration shall run from the date of the taxpayer's arbitration request - with all the necessary detail - unless the assessment notice is not issued until later
- the mutual agreement procedures shall be expeditious and free of any inappropriate or unnecessary burden on the taxpayer. The tax authorities shall keep the taxpayer informed of progress. If an authority is unable to accept the request of the taxpayer, it shall send the other authority a position paper setting out its views and suggestions for remedial action. If the other authority can accept that suggestion, it should say so; if not, it shall respond with its own paper and, if necessary, suggest a date for a personal meeting. All authorities will do their best to keep matters moving forward
- the same principles should be followed in dealing with mutual agreement procedures under double tax treaties
- the Code sets forth detailed rules on the establishment, rights and obligations of the advisory commission of independent persons during the second stage of arbitration
- collection of the disputed taxes should be suspended until the dispute is resolved
- member states are to sign and ratify the accession conventions to the Convention of the new member states within two years
- member states should report on the functioning of the Code to the Commission every two years.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.