Implementation of the EU Directive on Tax Dispute Resolution Mechanisms

The “EU-Besteuerungsstreitbeilegungsgesetz” (EU-BStbG), which was introduced in implementation of the EU directive on tax dispute resolution mechanisms, provides for mandatory and binding arbitration proceedings with fixed settlement periods in all cases of impending double taxation within the EU. This increases the chances for taxpayers to actually resolve double taxation conflicts in the foreseeable future. The scope of arbitration proceedings has been expanded considerably to include all cases of impending double taxation. If the requirements are met, there is a right to choose which procedure is used. In practice, however, the new process should largely replace the previous processes.

The EU-BStbG was published on 22 July 2019 as part of the “EU Finanzanpassungsgesetz”. In this context, there were procedural adjustments in the BAO (Federal Procedure Code):The reformulated Section 48 BAO is worthy of note in this context. This provides for assessment decisions in the course of the initiation and termination of the procedure. In addition, this previously provided for relatively uncomplicated temporary relief from double taxation for the duration of the mutual agreement procedure.

The new Section 48 (5) considerably limits the scope. Temporary relief for profits raised abroad is only possible within Austria if no bilateral agreement or arbitration is possible, i.e. if there is no DTA between Austria and the country concerned. Temporary relief for the duration of the mutual agreement procedure in DTA countries is now to be sought in the respective other country. This can result in temporary double taxation for the taxpayer for the duration of the mutual agreement or arbitration proceedings.

Updated Ministry of Finance advice on mutual agreement and arbitration proceedings (“BMF-Info zu Verständigungs- und Schiedsverfahren”) was published on 24 July 2019. It replaces the advice of 31 March 2015. However, this does not yet affect procedures under the EU-BStbG. Updated Ministry of Finance advice that includes the EU-BStbG can therefore be expected in the short term. In addition, as a result of the change in the OECD update on guidelines regarding country-by-country reporting, the Ministry of Finance advice on transfer pricing documentation (“BMF-Info Verrechnungspreisdokumentation”) was updated on 17 December 2019. However, the material effects are only minor.