Posted: 18 September 2009
Issue: Online only
Categories: Update, News, Tax adviser, Double Taxation, Government, Overseas

Revised code of conduct for applying arbitration convention

The European Union has moved to improve the prevention of double taxation, by proposing a revised code of conduct for applying the arbitration convention (AC).

The EU Commission has adopted a communication – based on the work achieved by the EU Joint Transfer Pricing Forum – that considers that the elimination of double taxation linked to transfer pricing adjustments is facilitated by constant monitoring of problems occurring in practice.

The Commission’s proposed new code of conduct is the result of a monitoring exercise on the application of the AC. Based on member states' practical experience, it was recognised that the three-year target for resolution of the cases was proving difficult to achieve.

The updated code clarifies and provides common interpretation of some provisions of the AC, to facilitate resolution of many more cases within the three-year time frame.

EC commissioner for taxation and customs union, Laszlo Kovacs, has urged member states to endorse the recommendations of the revised code and to implement them in their legislation or administrative practices.

The proposed common interpretation covers:

• serious penalties,
• the scope of the AC (triangular transfer pricing and thin capitalization cases),
• interest charged/credited by tax administrations when a case is dealt with under the AC,
• the functioning of the AC (as regards rules about the deadline for the setting-up of the Advisory Commission and criteria for establishing the independence of arbitrators),
• the date from which a case is admissible under the AC, and
• the interaction of the AC and domestic litigation.

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