Introduction to European Tax Law on Direct Taxation

Jean-Philippe Van West

S. 292I. Aim and History

790

Situations whereby different EU Member States differently interpret or apply a provision of a bilateral tax treaty can lead to undesired double taxation, resulting in tax obstacles for cross border trade and having a negative effect on the EU single market. Convention 90/436/EEC on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (hereinafter: Arbitration Convention) and Council Directive (EU) on tax dispute resolution mechanisms in the European Union (2017/1852) (hereinafter: Dispute Resolution Directive) were adopted to resolve double taxation disputes within the European Union. Although the Commission already proposed in 1976 a directive for the elimination of double taxation as regards profit adjustments in transfer pricing scenarios, it was only in 1990 that the Arbitration Convention was concluded. The aim of the Arbitration Convention is to establish a procedure to eliminate double taxation resulting from a profit adjustment by the competent authorities in one contracting state without a corresponding adjustment in the other contracting state. It is not an EU law instrument, but ...