CJEU – Recent Developments in Direct Taxation 2016

1. S. 2Overview

There is currently one Austrian case pending before the CJEU. It is a case that is not a truly “Austrian” case but rather a bilateral dispute between two Member States of the European Union, i.e. Austria and Germany. Consequently, the case is registered under the unusual case name “Republic of Austria v Federal Republic of Germany” (C-648/15). It is a case concerning a dispute over the interpretation of a particular rule in the Austria-Germany tax treaty. The dispute concerns whether Germany is allowed to levy a withholding tax on certain cross-border interest payments under Article 11 of the tax treaty. The details regarding this treaty issue are set out below.

The interesting aspect of this case, however, is not so much the underlying tax treaty issue. Rather, what makes the case interesting from a European law perspective is the dispute resolution mechanism set out in the Austria-Germany tax treaty that has ultimately brought the case to the CJEU. Article 25 paragraph 5 of the Treaty includes an arbitration clause for disputes that cannot be successfully resolved through the traditional mutual agreement procedure (MAP) between the contracting states. This might in itse...