3.2.Improving double taxation dispute resolution mechanisms
Double taxation occurs when different Member States tax the same income. This can be a serious tax obstacle for businesses operating in more than one Member State, creating unnecessary costs and administrative burdens for businesses. Double taxation in the Single Market has a negative impact on cross border investment and leads to economic distortions and inefficiencies. The common base in the CCCTB proposal would eliminate the risk of double taxation in the EU. However, until this is agreed, other solutions are needed.
Most Member States have bilateral tax treaties with each other to relieve double taxation when it occurs, and there are procedures to resolve disputes when they occur. However, these procedures are long, costly and do not always result in an agreement. 11 The multilateral Arbitration Convention, agreed between Member States to solve disputes between Member States, provides some relief. The Arbitration Convention's scope is limited to transfer pricing disputes, and there is no recourse to appeal the interpretation of the rules.
In order to create greater certainty for companies, the Commission will propose improvements to the current mechanisms to resolve double taxation disputes in the EU, by summer 2016. The aim is to create a coordinated EU approach to dispute resolution, with clearer rules and more stringent timelines, building on the systems already in place. This work will review whether the scope of the Arbitration Convention should be extended within the Union and whether turning it into an EU instrument would be more efficient in improving the functioning of the Single Market.
