2016-05-12-KPMG-Euro_Tax_Flash_from_KPMG_s_EU_Tax_Centre_5页_364kb

Euro Tax Flash Summary: KPMG Response to EU Consultation on Double Taxation Dispute Resolution Mechanisms

Core Content

On May 12, 2016, KPMG's EU Tax Centre published a summary of its response to the European Commission's public consultation on double taxation dispute resolution mechanisms. This consultation was part of the EU Action Plan for Fair and Efficient Corporate Taxation, launched in June 2015, which aims to address the challenges of double taxation and improve the business tax environment in the EU.

The consultation sought views on how to enhance the current mechanisms for resolving double taxation disputes, which include the Mutual Agreement Procedure (MAP) and arbitration under the EU Multilateral Arbitration Convention. Despite these mechanisms, KPMG noted that they remain inefficient, inconsistent, and time-consuming, especially in the context of increasing tax transparency and the implementation of BEPS (Base Erosion and Profit Shifting) initiatives.

Main Points and Key Information

1. Background

• The EU Commission launched a public consultation on double taxation dispute resolution mechanisms to improve the current systems.
• The Action Plan for Fair and Efficient Corporate Taxation highlights the negative impact of double taxation on cross-border investment.
• While the Common Consolidated Corporate Tax Base (CCCTB) would eliminate double taxation, it is not yet agreed upon, so alternative solutions are necessary.

2. Scope of Consultation

• The consultation focuses on improving the efficiency, scope, enforceability, and accessibility of existing dispute resolution mechanisms.
• It aims to gather stakeholders' views on:
  • The relevance of removing double taxation for cross-border businesses.
  • The impact and effectiveness of current mechanisms on EU-based businesses.
  • Improvement options and proposed solutions.

3. KPMG's Response

• KPMG believes that the legal framework for dispute resolution mechanisms needs to be enhanced.
• They highlight that the current mechanisms are not sufficient and that several obstacles remain.

3.1 Recommendations for the EU Arbitration Convention

• Broaden the scope to address issues such as PEs (Permanent Establishments) and thin capitalization.
• Increase enforceability by re-launching the initial plans for an EU Directive.
• Improve timeliness by making the two-year limit mandatory.
• Enhance efficiency by allocating more resources and implementing a "baseball arbitration clause" approach, where parties state their final positions and the arbitrator selects one.
• Improve accessibility by limiting access restrictions to exceptional and well-founded cases.
• Consider sanctions for tax authorities delaying the process, such as an automatic start of arbitration if a response is not received within a specified timeframe.

3.2 Support for OECD BEPS Recommendations

• KPMG supports the OECD's minimum standards for tax administrations in applying MAP.
• They suggest that these standards could be raised and more effectively monitored within the EU context.

3.3 Preference for Binding Arbitration

• KPMG argues that binding arbitration is the only way to effectively eliminate double taxation.
• They view the EU Arbitration Convention as a good model for an OECD-level system and advocate for a practical arbitration process.
• They caution against a legalistic approach (e.g., involving the CJEU), due to the additional costs and timeframes involved.

4. Next Steps

• The EU Commission is expected to propose improvements to the current mechanisms by summer 2016.
• These proposals aim to create a coordinated approach with clearer rules and more stringent timelines.
• The Commission will also consider extending the scope of the Arbitration Convention within the EU and whether it should be turned into an EU instrument to improve the functioning of the Single Market.

Conclusion

KPMG emphasizes the importance of an efficient, wide-ranging, and enforceable dispute resolution process to support multinational enterprises in the face of increased tax scrutiny and global reforms. The firm advocates for a modernized and streamlined arbitration system that aligns with both OECD and EU standards, ensuring legal certainty and business confidence in the European Union.