ArticlesNew instruments for resolving tax disputes within the EU

New instruments for resolving tax disputes within the EU

 Ι. Preamble

Even Socrates forced Thrasimahos (as per Plato’s Republic, see 346e–348b), strong supporter of the view of the “law of the most powerful”, aka “might makes right”, to admit that justice is a virtue of the soul that can ensure one’s happiness, we always want to think of justice as the vehicle to ensure our rights, but also as a the way to restore the rule of law.

The delay in the administration of justice is a blight (one of many) for businesses -and, of course, for natural persons as well.

Taking legal actions before Greek courts in order to make administrational claims is, in its very core, very problematic: One must not only be surrounded by the proper legal, financial and tax advisors and have sufficient funds, but also be equipped with the patience of Job. The amount of time it takes for a tax dispute to be resolved (although already improved) can approach or even exceed a decade(!).

The amount of time it takes to resolve a legal dispute before the courts (especially those disputes with an administrational – tax nature) seems to devoid of seriousness.

The possibility that someone may have to go through multiple legal systems of countries between which, for example, there are Double Taxation Agreements in place, is truly horrific: a lifetime does not seem enough…

The EU legal systems in place have not, until recently, neither protected the taxpayer’s rights, nor promoted the acceleration of the procedures in place that needed to be followed in order for a tax dispute to be resolved -a dispute that resulted from a wrong application, or no application at all, of Double Taxation Agreements.

Their improvement has been sought.


II. COUNCIL DIRECTIVE (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union

About three years ago (on 25.10.2016), the European Commission announced its plan for the taxation of businesses in the Union market, “delivering a growth-friendly and fair corporate tax system”.

Vice president Valdis Dombrovskis said, at that time, that: “Tax policy should support the EU’s goals of economic growth and social justice…”.

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs said: “With the rebooted CCCTB proposal, we’re addressing the concerns of both businesses and citizens in one fell swoop. The many conversations I’ve had as Taxation Commissioner have made it crystal-clear to me that companies need simpler tax rules within the EU. At the same time, we need to drive forward our fight against tax avoidance, which is delivering real change. Finance Ministers should look at this ambitious and timely package with a fresh pair of eyes because it will create a robust tax system fit for the 21st century.”

What made these men make such statements?

At that time (October 2016) there were about 900 unresolved disputes in the EU, estimated at 10.5 billion euros. These numbers were extremely high and the problem had to be resolved: The intention was to set clear deadlines so that the Member States commit to resolve the problems created by the double taxation and the agreements to avoid it.

One of the most important actions took was the Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union.


III. Substantial assumptions of Directive (EU) 2017/1852 of 10.10.2017

In the preamble of the Directive (which followed the above statements), there are some extremely interesting references. The most interesting of them can be found, in their original form, below:


(1) Situations in which different Member States differently interpret or apply the provisions of bilateral tax agreements and conventions or the Convention on the elimination of double taxation in connection with the adjustments of profits of associated enterprises …can create serious tax obstacles for businesses operating across borders. They create an excessive tax burden for businesses, and are likely to cause economic distortions and inefficiencies and to have a negative impact on cross-border investment and growth.

(2) For this reason, it is necessary that there are mechanisms in the Union that ensure the effective resolution of disputes concerning the interpretation and application of such bilateral tax treaties and the Union Arbitration Convention, in particular disputes leading to double taxation.

(4) … At the same time, in the spirit of a fair taxation system, it is necessary to ensure that mechanisms for dispute resolution are comprehensive, effective and sustainable. Improvements to dispute resolution mechanisms are also necessary to respond to the risk that the number of double or multiple taxation disputes will increase, with potentially high amounts being at stake, because tax administrations have established more regular and focused audit practices.

(5) It is crucial to introduce an effective and efficient framework for the resolution of tax disputes which ensures legal certainty and a business-friendly environment for investments in order to achieve fair and efficient tax systems in the Union. The dispute resolution mechanisms should also create a harmonised and transparent framework for solving disputes and thereby provide benefits to all taxpayers.

(6) The resolution of disputes should apply to different interpretation and application of bilateral tax treaties…


IV. The core provisions of Directive (EU) 2017/1852 of 10.10.2017

The object of this Directive

This Directive sets the rules for a mechanism used in resolving disputes between member states that emerge for interpreting and applying agreements and conventions aiming to eliminate double taxation. It defines the rights and obligations of the persons concerned (article 1) and it regards both natural and legal persons (article 2).

Complaint and amicable settlement

The legal and natural persons concerned can submit a complaint, containing specific data and information regarding the contested issue, with which objection they will request for the resolution of the issue from the relevant authorities of each Member State concerned. The complaint shall be submitted within three years from the receiving of the first notification of the measure that raised the contested issue. The Member States that received the objection can unilaterally resolve the issue within six months after the objection was submitted or after they received additional information they had requested. In this case, the procedure provided for by this Directive is concluded (article 3).

Alternatively, the competent authorities of the Member States concerned (and assuming they have accepted the submitted complaint) seek to resolve the contested issue by reaching an amicable settlement within two years. If they fail to do so, they inform the affected person for the reasons an amicable settlement was not reached (article 4).

Advisory Commission and Alternative Dispute Resolution Commission

In case an objection submitted is overruled or the Member States cannot reach an agreement, the affected party can request the formation of an Advisory Commission from the competed authorities of said Member States. The Advisory Commission delivers an opinion regarding the contested issue (article 6) and has the composition of one chair, one representative (or two) of each competent authority concerned and one intendent person (or two) of standing, appointed by each competent authority concerned (article 8)

The competent authorities of the Member States concerned may agree to set up an alternative dispute resolution commission instead of an Advisory Commission to deliver an opinion on how to resolve the question in dispute. The competent authorities of the Member States may also agree to set up an Alternative Dispute Resolution Commission in the form of a committee that is of a permanent nature (article 10).

The fees of the members of the abovementioned committees are not borne by the affected natural or legal person but are shared equally among the Member States. The same goes for the fairly substantial fees of the independent persons (1000€ per person per day) (article 12).

The Advisory Commission or the Alternative Dispute Resolution Commission shall deliver its opinion to the competent authorities of the Member States concerned no later than 6 months after the date on which it was set up, period which can be extended by three months. Where the Advisory Commission or Alternative Dispute Resolution Commission considers that the question in dispute is such that it would need more than 6 months to deliver an opinion, this period may be extended by three months. The Advisory Commission or Alternative Dispute Resolution Commission shall inform the competent authorities of the Member States concerned and the affected persons of any such extension.

Dispute Settlement

The competent authorities concerned shall agree on how to resolve the question in dispute within six months of the notification of the opinion of the Advisory Commission or Alternative Dispute Resolution Commission. The competent authorities may take a decision which deviates from the opinion of the Advisory Commission or Alternative Dispute Resolution Commission. However, if they fail to reach an agreement as to how to resolve the question in dispute, they shall be bound by that opinion. Where the final decision has not been implemented, the affected person may apply to the competent court of the Member State that failed to implement the final decision, in order to enforce implementation thereof. (article 15)

The possibility of turning to and implementing this Directive

It is possible that the action of a Member State that gave rise to a question in dispute has become final under national law. It is noteworthy that in this case the affected persons are not prevented from having recourse to the procedures provided for in this Directive. The submission of the question in dispute to the mutual agreement procedure or to the dispute resolution procedure shall not prevent a Member State from initiating or continuing judicial proceedings or proceedings for administrative and criminal penalties in relation to the same matters.

Provisions for natural persons and smaller undertakings

Where the affected person is either: an individual or not a large undertaking and does not form part of a large group (both as defined in Directive 2013/34/EU of the European parliament and of the Council) the procedure the affected person has to follow becomes much simpler. The complaints, requests, withdrawals etc. do not have to be submitted to all competent authorities of all Member States concerned, but only to those where the affected party resides. (Article 17)


V. The consequences of a (non) transposition of this Directive to our national law

The Member States of the European Union where obligated tobring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 30 June 2019 at the latest(article 22).

Our country did not.

This raises an interesting issue, since the Directive does not apply where a Member State has not taken national measures.

Nevertheless, the Court of Justice of the European Union has ruled that some provisions of a Directive can, as an exception, be implemented directly in a Member State, even if said State has not yet taken national measures for its implementation, under the following conditions: a) the Directive has not yet been transposed to the national law or it has been transposed incorrectly; b) the provisions of the Directive are obligatory and are adequately clear and accurate; and c) the provisions of the Directive recognize rights to specific persons.

Since these conditions are met, specific persons can invoke the provisions of this Directive before all public authorities. Even when a provision of this Directive does not recognize a specific right to an individual, resulting in the first and third condition not being met, the authorities of the Member State are legally obligated to take the non incorporated Directive under consideration. The aforementioned precedent is mainly based on the principles of efficiency, prevention of infringement of the Treaty and effective protection. Contrariwise, an individual cannot invoke a non incorporated Directive before another individual (the “horizontal direct effect”; Case C-91/92 Faccini Dori, ECR I-3325 et seq, point 25).


Entry into force and application of the Directive

According to the above, this Directive (although not yet incorporated into the national law) is applied in every appeal submitted since the 1st of July, 2019 and on in debated issues, that have to do with income or capital that was acquired in a fiscal year starting the 1st  January 2018 or after this date (article 23).

According to the precedents of the Court (joined cases Francovich, Collection 6/90 and 9/90), a citizen can claim compensation from a member state that does not apply EU legislation. In the case of a Directive that has not been incorporated or it has been incorporated in a non-comprehensible manner in the national law, similar appeal is possible when: a) the directive aims to give rights to individuals, b) the content of the rights can be determined based on the provisions of the directive, and c) there is a causal link between the violation of incorporating the directive into the national law and the damage the individual suffered. To substantiate responsibility of the member state, there is no need for liability to be proven.

Therefore: possible denial of applying the provisions of this Directive by our country (by not incorporating it in our national legislation) arises claims for compensation against it.



The delay in the administration of justice is one of the hundreds of issues that concern the business community – and not only them.

It was something the Institutions tried to improve by the support programs. Unsuccessfully in my opinion.

The delay in resolving administrational – tax disputes, can only cause desperation (even without taking into consideration the delays of the recent, even, past).

The problem was more severe when more than one states were involved (i.e. when trying to avoid double taxation agreements): reaching deadlocks was not so rare or manageable.

Council Directive (EU) 2017/1852 of 10 October 2017 looks towards facilitating persons and businesses facing situations (for which they have no responsibility) in the context of resolving tax disputes where persons and more than one states are involved. The time frame expected for these procedures is not so short. It is, though, for sure a very important step to the right direction, but still far from the objective: delivering right and justice.

Because (according to the British suffragette Emmeline Pankhusrt): “Justice and judgment lie often a world apart”…


Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (August, 4th, 2019).

Stavros Koumentakis
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(+30) 2310 27 80 84

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