The European Commission on Tuesday presented a proposal for a Code of Conduct to eliminate double taxation of companies arising from intra-group transactions.
The proposal is based on the work of the EU Joint Transfer Pricing Forum, and would apply in cases where an EU Member State's tax administration increases the taxable profits of a company from its cross-border intra-group transactions, for example by making a transfer pricing adjustment.
The Code is designed to ensure a more effective and uniform application by EU Member States of the 1990 Arbitration Convention, and determines procedural rules such as the starting points of the time limits for dealing with complaints, arrangements concerning the advisory commission that must be established if Member States cannot reach agreement on the elimination of double taxation within two years, and the suspension of tax collection during the dispute resolution period.
The Code also recommends that Member States apply these rules to the dispute settlement provisions in their double taxation treaties with each other. The Arbitration Convention is not in force at present because not all Member States have ratified its extension yet.
Speaking with regard to the legislation, Taxation Commissioner, Frits Bolkestein announced that:
"The proposed Code of Conduct should ensure that EU dispute settlement procedures operate more efficiently so as to eliminate double taxation of company profits within the Internal Market."
However, he went on to add that:
"I must also urge those Member States that have not yet ratified the extension of the Arbitration Convention to take the necessary steps as soon as possible since the Convention cannot apply anywhere in the EU until they do so."
The full text of the proposed Code of Conduct can be found in the Tax-News Resources section.
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