The Ministry of Finance has presented a draft Act on International Cooperation in Tax Dispute Resolution for consultation. It is a new act designed to transpose Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union (“DRM Directive”). It should also be applied to resolve disputes with countries with which the Czech Republic has concluded a Double Taxation Treaty.
The principles of the new regulation are therefore based on existing mechanisms stipulated by international treaties, and the provisions codify the existing mechanisms, clearly determine the course of the process of international tax dispute resolution, the competencies of individual participants and the deadlines for the intermediate steps.
The new provisions should be applied with respect to all contracting states. With respect to the member states of the European Union, certain additional institutes will apply, such as the possibility to access tax arbitration (which can, however, also arise from international treaties). In addition, they contain so-called control mechanisms which allow summoning an advisory body (composed of representatives of the competent authorities and experts) in certain stages of the proceedings for an independent and unbiased assessment of the dispute. The advisory body can assess the admissibility of the request as such (if there is a disagreement between the states as to whether or not the request is admissible) or it can perform tax arbitration – material assessment of the question in dispute if the competent authorities do not reach an amicable resolution of the case within a two-year period.
Large entities will file requests for the questions in dispute in all of the affected countries, smaller entities and natural persons should be able to use a simplified filing system. The process is expected to result in achieving an agreement, or issuing a decision on the question in dispute that the taxpayer may use during specific proceedings with the tax authority.
The proposed effective date of the new act is 30 June 2019.
The article is part of dReport – October 2018, Tax news; Grants and investment Incentives.
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