In order to avoid double taxation, “Fashion Distributor A/S” had requested the Danish Tax Authorities, in parallel to the review of a transfer pricing assessment, to conduct a mutual agreement procedure under Article 6 of the EC Arbitration Convention 1990. The Danish Tax Authorities rejected the request on the grounds that it did not contain the minimum information required by paragraph 5(a) of the Code of Conduct for the effective implementation of the Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (EU Code of Conduct 2006). Judgement of the High Court The Court held that the reference in Article 7(1) of the EC Arbitration Convention to Article 6(1) had to be understood as referring only to the ‘timely presented case’ and did not imply that case was also ‘submitted’ within the meaning of Article 7(1). Furthermore, the Court found that the company’s complaint of double taxation undoubtedly appeared justified, and that ... Read more

A request for mutual agreement and arbitration procedure between Spain and Germany was denied due to highly punishable violation of tax regulations committed by the taxpayer. The mutual agreement procedure according to the EU Arbitration Convention is of a mandatory nature and therefore leads to the elimination of double taxation if the requirements are met. However, if it is determined through legal or administrative proceedings that one of the companies involved has committed a highly punishable violation of tax regulations that result in a profit adjustment, then there is no obligation to carry out the mutual agreement and arbitration proceedings. Rather, the competent authority then has to decide on the implementation of the procedure at its due discretion. When assessing whether there has been a serious punishable violation, the person responsible for the company must be taken into account. But whether this person was actually punished for the violation of tax regulations is not decisive. The judicial determination of a ... Read more

In order to avoid double taxation, a company had requested the Danish tax authorities (SKAT), “in parallel” with the review of a transfer pricing adjustment, that a mutual agreement procedure be carried out under the EC Arbitration Convention. SKAT had refused on the grounds that the 3-year time limit for this under Article 6 of the Convention had been exceeded. The company had appealed SKAT’s decision to the Tax Tribunal, but had at the same time – in accordance with SKAT’s instructions on bringing proceedings in the contested decision – appealed against the decision to the courts. Decision of the High Court The Court held that the EC Arbitration Convention is covered by the provision in § 2, cf. § 1, of Order No 1029 of 24 October 2005 on double taxation conventions. SKAT’s decision could therefore not be appealed to another administrative authority, but had to be brought before the courts instead, as had happened. SKAT had rejected the ... Read more

In April 2015 the Forum agreed on a Report on Improving the Functioning of the Arbitration Convention including a revised Code of Conduct for the effective implementation of the Arbitration Convention. The report and the revised Code of Conduct are the result of a monitoring exercise carried out by the JTPF and provide clarification inter alia on the following topics: Application of the AC in certain cases (absence of tax payment, changes in the status of the taxpayer) Transparency in cases when access to the AC is denied Implications of the new Article 7 OECD Model Tax Convention (2010) Functioning of the AC (e.g. as regards the 3 year period under Article 6 (1) AC) Serious penalties, tax collection and interest charges ... Read more