Even in the event of an arbitration request, the EU review found that there could be many shortcomings in the system, including delays or lack of setting up the advisory committee and the lack of agreement on the appointment of the chairman of the advisory committee that delays or prevents the procedure. IEs should ensure that the following reporting language is included in the audit plan for taxpayers with a coordinated industrial business (CIC): “During the review, adjustments to their income tax debt may be recommended, resulting in double economic taxation due to your various subsidiaries operating abroad. This is why we recommend that you recommend that your foreign subsidiaries in these countries inform the relevant tax authorities of the postponement of the expiry of the statutory limitation period for refunds or other tax adjustments. This procedure should not be limited to foreign related companies listed on page 4 of this part of the audit plan. If these adjustments affect the tax debt of a subsidiary operating in a contracting country, you have the right to ask the competent authority, in accordance with paragraphs 96 to 13, to reduce economic double taxation. The agreements designate the Director International as the official responsible for the amicable resolution of any discrepancies that may result from the application of U.S. tax law and its assets. When a subject wishes to challenge incompatible issues (including POPs issues), EI prepares an unlicensed EI report explaining the amount of adjustment and the tax impact on all issues. A 30-day letter will be published after approval of the unass approving IE report and the MAP report. Then, the due process for reviewing the protest and transmitting the case to appeals will be followed. In addition to these developments, taxpayers in EU Member States have benefited from the benefits of the EU Arbitration Convention. The agreement, which was a landmark at the time of its drafting in 1990, has benefited from a series of updates drawn up by the EU Joint Forum on Transfer Prices and has been anchored in the EU`s Soft-Law by various codes of conduct adopted by EU Member States.
However, the convention has always been agitated in the EU canon and has not been an EU regulatory instrument. This fundamental problem was addressed in 2019 by the European Arbitration Directive, a more formal and extensive instrument than the Convention, which effectively replaces it. Field staff should be familiar with the procedures, decisions and revenue rules applicable to POPs requirements. Given these gaps in 2017, the EU Council has adopted the 2017/1852 Directive on Tax Conflict Mechanisms in the EU to enable a faster and more effective settlement of tax disputes between member states. Under the Arbitration Directive, the procedure for submitting a case (called a “claim”) is similar to that of the arbitration agreement. However, it corrects many of the convention`s shortcomings: overall, it is clear that the MLI extends taxpayers` access to three years, both in terms of extending the period during which taxpayers must commit a map period, and an effective two-year period for the competent authorities to resolve a case (after that date, it can be subject to arbitration). The MLI has led to a greater homogeneity of approach on key issues such as arbitration and, above all, the adoption of a single map article for covered tax treaties. Some might argue that arbitration has the advantage of encouraging Member States to settle disputes before the two-year deadline expires, which would be a success rather than a failure of the convention.
However, statistics also show that 202 cases had exceeded the two-year deadline, while it had been cancelled with the taxpayer`s consent.