Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee on the work of the EU Joint Transfer Pricing Forum in the field of business taxation from October 2002 to December 2003 and on a proposal for a Code of Conduct for the effective implementation of the Arbitration Convention (90/436/EEC of 23 July 1990)
Date: 2004-04-23
Institutions: European Commission
Subjects: EU body, code of conduct, domestic market, tax system, transfer pricing

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.04.2004 
COM(2004) 297 final 

COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL, THE EUROPEAN PARLIAMENT AND 
THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE 

on the work of the EU Joint Transfer Pricing Forum in the field of business taxation 
from October 2002 to December 2003 and on a proposal for a Code of Conduct for the 
effective implementation of the Arbitration Convention (90/436/EEC of 23 July 1990) 

EN 

   EN 

 
 
 
  
TABLE OF CONTENTS 

INTRODUCTION...................................................................................................................... 3 

1. 

2. 

3. 

Background .................................................................................................................. 3 

Activities of the EU Joint Transfer Pricing Forum from October 2002 to December 
2003.............................................................................................................................. 4 

Commission conclusions.............................................................................................. 4 

ANNEX I: ESTABLISHMENT OF THE JTPF ........................................................................ 7 

ANNEX II: DRAFT CODE OF CONDUCT............................................................................. 9 

ANNEX III: REPORT ON THE ACTIVITIES OF THE EU JOINT TRANSFER PRICING 
FORUM IN THE FIELD OF BUSINESS TAXATION OCTOBER 2002 – 
DECEMBER 2003 ..................................................................................................... 18 

1. 

2. 

3. 

4. 

Summary of the proceedings of the meetings of the EU Joint Transfer Pricing Forum
.................................................................................................................................... 18 

Conclusions and recommendations on issues related to the Arbitration Convention 
and on certain related issues of mutual agreement procedures under double tax 
treaties between Member States................................................................................. 20 

Other issues examined by the JTPF in relation to double taxation resulting from 
transfer pricing adjustments ....................................................................................... 25 

Conclusions ................................................................................................................ 26 

ANNEX I:: MEMBER STATES' POSITION DURING THE INTERIM PERIOD ............... 27 

ANNEX II: DRAFT CODE OF CONDUCT........................................................................... 28 

Annex to the draft Code of Conduct ........................................................................................ 37 

2 

 
 
  
 
 
1. 

1. 

2. 

3. 

4. 

1 

2 

3 

INTRODUCTION 

BACKGROUND 

The  European  Commission's  Study  “Company  Taxation  in  the  Internal  Market"1 
examined whether the current application of company taxation in the Internal Market 
creates inefficiencies and prevents operators from exploiting its full benefits. It did so 
in response to the mandate given to the Commission by the Council of Ministers in 
July 1999 to investigate the impact of differentials in the effective level of corporate 
taxation in Member States on the location of economic activity and investment and 
the  impact  of  tax  provisions  that  constitute  obstacles  to  cross-border  economic 
activities in the Internal Market and remedies thereto.  

This  Study  highlighted  in  detail  (part  III,  chapter  5)  the  increasing  importance  of 
transfer pricing tax problems as an Internal Market issue. The obstacles and problems 
identified are varied in nature but all have become increasingly important in recent 
years  and  call  for  action.  The  deepening  of  the  Internal  Market  and  the  growing 
number  of  new  technologies  and  business  structures  at  national  and  international 
level  has  aggravated  these  problems  over  the  last  few  years.  There  is  convincing 
evidence  that  applying  transfer  prices  for  tax  purposes  is  complicated  and  often 
problematic  in  practice.  A  common  feature  of  many  of  the  specific  individual 
problems is that closer co-operation between tax administrations and business could 
lead  to  solutions.  The  Study  considers  the  improvement  of  co-ordination  between 
Member States of major importance in the short term in order to reduce compliance 
costs and lessen the uncertainty relating to transfer pricing. 

One  of  the  possible  methods  of  tackling  the  specific  EU  transfer  pricing  problems 
mentioned  in  the  Study,  and  proposed  by  the  Commission  in  its  Communication 
“Towards  an  Internal  Market  without  tax  obstacles  –  A  strategy  for  providing 
companies with a consolidated corporate tax base for their EU-wide activities ”2, was 
the establishment of a “EU Joint Transfer Pricing Forum” (Hereafter: JTPF). 

Following the Council Conclusions of 11 March 2002 welcoming this initiative, the 
Commission established the JTPF. Its members consist of an expert of each Member 
State and 10 experts from business. Representatives from applicant countries and the 
OECD-Secretariat  attend  as  observers.  Details  on  the  procedure  followed  for  the 
selection  of  the  Chairman  and  the  JTPF  Members  are  contained  in  Annex  I  of  this 
Communication.  The  proceedings  of  the  JTPF  are  available  on  the  Commission's 
website.3 

the 

Internal  Market”  Commission 

“Company  Taxation 
in 
SEC(2001) 1681 23.10.2001. 
“Communication from the Commission to the Council, the European Parliament and the Economic and 
Social  Committee:  Towards  an  Internal  Market  without  tax  obstacles  –  A  strategy  for  providing 
companies  with 
activities” 
COM(2001) 582 final, 23.10.2001. 
http://europa.eu.int/comm/taxation_customs/taxation/company_tax/transfer_pricing.htm 

their  EU-wide 

staff  working 

consolidated 

corporate 

paper, 

base 

tax 

for 

a 

3 

 
 
  
 
                                                 
2. 

5. 

3. 

6. 

7. 

8. 

ACTIVITIES  OF  THE  EU  JOINT  TRANSFER  PRICING  FORUM  FROM  OCTOBER  2002 
TO DECEMBER 2003 

The JTPF met for the first time on 3 October 2002 and established a two-year work 
programme. An activity report of the JTPF, adopted by consensus and covering the 
first  element  of  the  work  programme,  is  annexed  to  the  present  Communication 
(Annex  III).  The  JTPF  has  so  far  mainly  discussed  the  problems  related  to  the 
application  of  the  Arbitration  Convention4.  It  has  examined  problems  that  have 
occurred in the last few years as a result of the fact that not all contracting states have 
ratified  the  Accession  Convention  of  the  Republic  of  Austria,  the  Republic  of 
Finland  and  the  Kingdom  of  Sweden  (Accession  Convention)  and  the  Protocol 
amending  the  original  Convention  (Prolongation  Protocol).  Furthermore,  the  JTPF 
has  looked  for  clear  definitions  of  the  starting  point  of  the  three  year  (notification) 
and  two-year  (mutual  agreement)  periods  enshrined  in  the  first  phase  of  the 
arbitration  procedure  established  under  the  Arbitration  Convention.  It  has  also 
examined  ways  to  improve  the  mutual  agreement  and  arbitration  phases  and 
addressed  issues  such  as  the  interaction  of  the  mutual  agreement  and  arbitration 
procedure with administrative and judicial appeals, the possibility of suspending tax 
collection  during  cross  border  dispute  resolution  procedures,  the  accession  of  EU 
Acceding States to the Arbitration Convention and the effect of interest charges and 
penalties. The activity report summarises the deliberations of the JTPF. It concludes 
by inviting the Commission to propose a Code of Conduct setting out detailed rules 
to  ensure  the  effective  implementation  of  the  Arbitration  Convention  (Convention 
90/436/EEC of 23 July 1990 on the elimination of double taxation in connection with 
the  adjustment  of  profits  of  associated  enterprises)  and  dealing  with  certain  related 
issues  of  the  mutual  agreement  procedures  under  double  tax  treaties  between 
Member States. The report proposes that this Code could be adopted by the Council 
in the format of a Resolution. 

COMMISSION CONCLUSIONS 

Considering  the  aforementioned  activity  report  of  the  JTPF,  the  Commission  can 
only  express  its  satisfaction  with  the  work  of  the  JTPF  which  has  proved  to  be  a 
constructive tool to tackle the challenges posed by transfer pricing policies in the EU.  

The  experts  from  the  Member  States  and  those  from  business  have  examined  the 
different  issues  at  stake  in  an  open  and  constructive  manner  that  has  lead  to 
pragmatic non-legislative proposals and recommendations for solutions. 

However,  the  Commission  regrets  that  the  JTPF  had  to  spend  much  of  its  meeting 
time  on  issues  linked  to  the  fact  that  the  Prolongation  Protocol  to  the  Arbitration 
Convention  as  well  as  the  Accession  Convention,  signed  in  1999  and  1995 
respectively, have not yet been ratified by all Member States. Clearly this situation 
would not have arisen had the Council followed the original Commission proposal of 
adopting an instrument under Community law rather than a multilateral Convention. 

4 

Convention 90/436/EEC of 23 July 1990, on the elimination of double taxation in connection with the 
adjustment of profits of associated enterprises OJ L 255, 20.8.1990, p. 10-24. 

4 

 
 
  
 
                                                 
9. 

10. 

11. 

12. 

The  specific  problem  of  the  accession  of  the  EU  Member  States  to  the  Arbitration 
Convention (3.1 of the JTPF report) is of particular concern to the Commission. As 
demonstrated by the previous enlargement of the EU, the time that the future 25 EU 
Member  States  could  take  to  ratify  this  instrument  might  seriously  jeopardise  its 
added value for the new EU Member States and for corporate business as a whole in 
that geographic area. Moreover the network of bilateral double tax treaties between 
the  new  EU  Member  States  themselves  and  between  those  States  and  the  current 
Member  States  is  not  complete,  despite  the  efforts  made  to  complete  it.  This 
sometimes makes it impossible for business to request a mutual agreement procedure 
so as to obtain relief from double taxation. The Commission therefore endorses fully 
the  recommendation  of  the  JTPF  that  the  Member  States  should  commit  to 
ratification  of  an  Accession  Convention  for  the  new  EU  Member  States  before  the 
end of the first half of 2006. Moreover, this Accession Convention should contain a 
provision  permitting  immediate  bilateral  application  between  ratifying  Member 
States. The Commission is also in favour of including in the Arbitration Convention 
itself a legal provision that would avoid a repeat of the time consuming ratification 
process  after  each  EU  enlargement  e.g  by  providing  for  automatic  accession  or 
accession by unilateral declaration.  

The  Commission  looks  forward  to  the  Forum's  work  on  the  remainder  of  the  work 
programme  adopted  in  2002.  In  this  context,  the  Commission  would  like  to  dispel 
misunderstandings that may have arisen concerning the Forum's mandate to "identify 
possible  non-legislative  improvements  to  …  practical  problems".  The  objective  of 
this  element  of  the  mandate  was  to  avoid  any  prejudice  to  the  respective 
competencies  of  the  EU  institutions  and  the  Member  States  and  thus  it  concerns 
Community  legislation.  This  element  of  the  mandate  should  not  in  any  way  be 
considered to preclude the JTPF from identifying practical improvements that could 
imply  legislative  changes  in  certain  Member  States.  Since  the  JTPF  is  a  purely 
consultative expert group, the decision on any potential legislative changes would in 
any event remain solely with the Member States concerned.  

Taking  into  account  the  remaining  and  important  outstanding  issues  of  the  JTPF's 
working programme adopted in 2002, the Commission intends to extend from June 
2004 until the end of 2004 the initial period of two years foreseen for the activities of 
the  JTPF.  Taking  into  account  the  overall  results  and  further  issues  for  discussion 
identified  and  proposed  by  the  JTPF,  the  Commission  might  decide  on  a  further 
extension of the JTPF mandate for another period of two years.  

of 

Deliberations  in  the  JTPF  have  highlighted  the  difficulties  encountered  in  the 
implementation 
and 
the  Arbitration  Convention.  The 
recommendations proposed by the JTPF would resolve many of its shortcomings and 
the  Commission  is  of  the  opinion  that  their  practical  implementation  could  lead  to 
important  progress  in  achieving  a  proper  tool  to  remedy  double  taxation  related  to 
transfer  pricing  in  the  E.U.  In  view  of  these  considerations  and  in  function  of  the 
follow-up given to the present Commission proposal by the Council, the Commission 
will assess the need for proposing an instrument of Community law at a later stage.  

conclusions 

5 

 
 
  
 
13. 

As an intermediate solution however, the Commission fully supports the conclusions 
and  recommendations  contained  in  the  first  activity  report  of  the  JTPF,  and  it 
therefore invites the Council to adopt as soon as possible the proposal for a Code of 
Conduct  on 
implementation  of  Convention  90/436/EEC  of 
23 July 1990,  on  the  elimination  of  double  taxation  in  connection  with  the 
adjustment  of  profits  of  associated  enterprises,  as  laid  down  in  annex  II  of  this 
Communication.  

the  effective 

6 

 
 
  
 
ANNEX I: ESTABLISHMENT OF THE JTPF 

Selection of Chair 

The Council conclusions of 11 March 2002 stated that the Chair of the JTPF should 
be an independent personality with long standing experience in the field of transfer 
pricing who should be appointed by the Commission in agreement with a Selection 
Board  composed  of  high  level  representatives  of  the  Council  Presidency,  the 
Commission and the UNICE Tax Committee. 

This  Selection  Board  was  composed  of  Mr.  José  Maria  VALLEJO  CHAMORRO, 
Deputy  Director  General  for  International  Tax  Affairs,  representing  the  Spanish 
Presidency,  Mr.  Jan  van  der  BIJL,  Chairman  of  the  UNICE  Fiscal  Affairs 
Committee, and Mr. Michel AUJEAN, Director of the Directorate for Tax Policy of 
the  Commission's  Directorate-General  for  Taxation  and  the  Customs  Union.  The 
selection board unanimously agreed on Mr. Bruno GIBERT, partner of CMS Bureau 
Francis Lefebvre, as Chairman of the JTPF 

Selection of business experts 

Following the publication of the call for applications of interest for the establishment 
of the JTPF in the OJ C 90 of 16 April 2002, the above selection board, referred to in 
paragraph 1.2.1 §6, met on 28 June 2002 to consider the list of selected applications 
for participation as business representatives. These members would act in their own 
capacity and for a renewable period of two years. 

The  Commission  received  60  applications  of  which  six  were  received  after  the 
deadline fixed in the call for applications.  

Taking  into  account  the  criteria  laid  down  in  the  call,  (proven  abilities  and 
experience in the field of transfer pricing, proven knowledge and experience with EU 
Community legislation and internal market and taxation issues in particular) and the 
need for a balanced composition in terms of geographical origin, size of business and 
type  of  activity,  the  selection  board  decided  to  select  the  following  applicants  (in 
alphabetical order: 

Mr. Philip GILLET 
Mr. Eduardo GRACIA  
Mr. Guy KERSCH 
Dr. Klaus KROPPEN  
Prof. Gugliemo MAISTO 
Dr. Ulrich MOEBUS 
Mrs. Sylvie PUECH  
Mr. Chris ROLFE  
Mr. Theo SCHMIT  
Prof. Dirk VAN STAPPEN 

7 

 
 
  
 
Appointment of experts from Member States’ tax administrations  

A letter inviting Member States to appoint an expert to participate in the JTPF was 
sent out on 10 June 2002. All addressees replied positively and appointed an expert. 

Appointment  of  observers 
administrations and OECD  

from  EU  Candidate  Member  States’ 

tax 

A  letter  inviting  EU  candidate  countries  and  OECD  to  appoint  an  observer  to  the 
JTPF  was  sent  out  on  10  June  2002.  Except  for  Romania  all  addressees  replied 
positively and appointed an observer. 

8 

 
 
  
 
ANNEX II: DRAFT CODE OF CONDUCT 

THE  COUNCIL  OF  THE  EUROPEAN  UNION AND  THE REPRESENTATIVES 
OF  THE  GOVERNMENTS  OF  THE  MEMBER  STATES,  MEETING  WITHIN 
THE COUNCIL,  

HAVING  REGARD  TO  Convention  90/436/EEC  of  23  July  1990,  on  the 
elimination  of  double  taxation  in  connection  with  the  adjustment  of  profits  of 
associated enterprises, 

ACKNOWLEDGING the need both for Member States and taxpayers to have more 
detailed rules to implement efficiently the aforementioned Convention, 

NOTING the Commission communication on the report on the activities of the EU 
Joint Transfer Pricing Forum in the field of business taxation of ……………2004,  

EMPHASISING  that  the  Code  of  Conduct  is  a  political  commitment  and  does  not 
affect  the  Member  States'  rights  and  obligations  or  the  respective  spheres  of 
competence of the Member States and the Community resulting from the Treaty, 

ACKNOWLEDGING  that  the  implementation  of  this  Code  of  Conduct  should  not 
hamper solutions at more global level, 

HEREBY ADOPT THE FOLLOWING CODE OF CONDUCT: 

Without prejudice to the respective spheres of competence of the Member States 
and  the  Community,  this  Code  of  Conduct  concerns  the  implementation  of 
Convention  90/436/EEC of 23 July 1990,  on the elimination of double taxation 
in  connection  with  the  adjustment  of  profits  of  associated  enterprises  and 
certain  related  issues  of  the  mutual  agreement  procedure  under  double  tax 
treaties between Member States.  

1. 

The  starting  point  of  the  three-year  period  (deadline  for  submitting  the 
request according to Article 6 (1) of the Arbitration Convention  

The date of the “first tax assessment notice or equivalent which results or is likely to 
result  in  double  taxation  within  the  meaning  of  Article  1,  e.g.  due  to  a  transfer 
pricing adjustment” is considered as the starting point for the three-year period.  

As far as transfer pricing cases are concerned, Member States are recommended to 
apply this definition also to the determination of the three-year period as provided for 
in Article 25 (1) of the OECD Model Tax Convention on Income and on Capital and 
implemented in the double tax treaties between EU Member States.  

9 

 
 
  
 
2. 

(i) 

The starting point of the two-year period (Article 7 (1) of the Arbitration 
Convention) 

For the purpose of Article 7 (1) of the Convention, a case will be regarded as 
having  been  submitted  according  to  Article  6  (1)  when  the  taxpayer  provides 
the following :  

a) 

b) 

c) 

d) 

e) 

f) 

g) 

identification  (such  as  name,  address,  tax  identification  number)  of  the 
enterprise  of  the  Contracting  State  that  presents  its  request  and  of  the 
other parties to the relevant transactions; 

details  of  the  relevant  facts  and  circumstances  of  the  case  (including 
details of the relations between the enterprise and the other parties to the 
relevant transactions); 

identification of the tax periods concerned; 

copies  of  the  tax  assessment  notices,  tax  audit  report  or  equivalent 
leading to the alleged double taxation; 

details of any appeals and litigation procedures initiated by the enterprise 
or  the  other  parties  to  the  relevant  transactions  and  any  court  decisions 
concerning the case; 

an  explanation  by  the  enterprise  of  why  it  thinks  that  the  principles  set 
out in Article 4 of the Arbitration Convention have not been observed; 

an  undertaking  that  the  enterprise  shall  respond  as  completely  and 
quickly as possible to all reasonable and appropriate requests made by a 
competent  authority  and  have  documentation  at  the  disposal  of  the 
competent authorities; and 

h) 

any specific additional information requested by the competent authority 
within two months upon receipt of the taxpayer’s request. 

(ii)  The two-year period starts on the latest of the following dates: 

a) 

b) 

the  date  of  the  tax  assessment  notice,  i.e.  a  final  decision  of  the  tax 
administration on the additional income, or equivalent; 

the  date  on  which  the  competent  authority  receives  the  request  and  the 
minimum information as stated under point 2 (i). 

3.  Mutual agreement procedures under the Arbitration Convention 

3.1  General provisions 

a) 

The arm’s length principle will be applied, as advocated by the OECD, without 
regard to the immediate tax consequences for any particular Contracting State. 

b)  Cases will be resolved as quickly as possible having regard to the complexity 

of the issues in the particular case in question. 

10 

 
 
  
 
c)  Any  appropriate  means  for  reaching  a  mutual  agreement  as  expeditiously  as 
including  face-to-face  meetings,  will  be  considered;  where 
possible, 
appropriate,  the  enterprise  will  be  invited  to  make  a  presentation  to  its 
competent authority. 

d) 

e) 

Taking into account the provisions of this Code, a mutual agreement should be 
reached within two years of the date on which the case was first submitted to 
one of the competent authorities in accordance with point 2 (ii) of this Code. 

The  mutual  agreement  procedure  should  not  impose  any  inappropriate  or 
excessive compliance costs on the person requesting it, or on any other person 
involved in the case. 

3.2  Practical functioning and transparency  

a) 

b) 

c) 

d) 

e) 

In  order  to  minimise  costs  and  delays  caused  by  translation,  the  mutual 
agreement procedure, in particular the exchange of position papers, should be 
conducted  in  a  common  working  language,  or  in  a  manner  having  the  same 
effect, if the competent authorities can reach agreement on a bilateral basis.  

The  enterprise  requesting  the  mutual  agreement  procedure  will  be  kept 
informed  by  the  competent  authority  to  which  it  made  the  request  of  all 
significant developments that affect it during the course of the procedure. 

The confidentiality of information relating to any person that is protected under 
a  bilateral  tax  convention  or  under  the  law  of  a  Contracting  State  will  be 
ensured. 

The  competent  authority  will  acknowledge  receipt  of  a  taxpayer’s  request  to 
initiate a mutual agreement procedure within one month from the receipt of the 
request  and  at  the  same  time  inform  the  competent  authorities  of  the  other 
Contracting  States  involved  in  the  case  attaching  a  copy  of  the  taxpayer’s 
request.  

If  the  competent  authority  believes  that  the  enterprise  has  not  submitted  the 
minimum  information  necessary  for  the  initiation  of  a  mutual  agreement 
procedure  as  stated  under  point  2  (i),  it  will  invite  the  enterprise  within  two 
months  upon  receipt  of  the  request,  to  provide  it  with  the  specific  additional 
information it needs. 

f) 

Contracting  States  undertake  that  the  competent  authority  will  respond  to  the 
enterprise making the request in one of the following forms:  

(i) 

(ii) 

if the competent authority does not believe that profits of the enterprise 
are included, or are likely to be included, in the profits of an enterprise of 
another Contracting State, it will inform the enterprise of its doubts and 
invite it to make any further comments; 

if the request appears to the competent authority to be well-founded and 
it can itself arrive at a satisfactory solution, it will inform the enterprise 
accordingly  and  make  as  quickly  as  possible  such  adjustments  or  allow 
such reliefs as are justified; 

11 

 
 
  
 
(iii) 

if the request appears to the competent authority to be well-founded but it 
is  not  itself  able  to  arrive  at  a  satisfactory  solution,  it  will  inform  the 
enterprise that it will endeavour to resolve the case by mutual agreement 
with the competent authority of any other Contracting State concerned. 

g) 

If a competent authority considers a case to be well founded, it should initiate a 
mutual agreement procedure by informing the competent authority of the other 
Contracting  State  of  its  decision  and  attach  a  copy  of  the  information  as 
specified  under  point  2  (i)  of  this  Code.  At  the  same  time  it  will  inform  the 
person  invoking  the  Arbitration  Convention  that  it  has  initiated  the  mutual 
agreement procedure. The competent authority initiating the mutual agreement 
procedure  will  also  inform  -  on  the  basis  of  information  available  to  it  -  the 
competent authority of the other Contracting State and the person making the 
request whether the case was presented within the time limits provided for in 
Article 6 (1) of the Arbitration Convention and of the starting point for the two-
year period of Article 7 (1) of the Arbitration Convention.  

3.3  Exchange of position papers 

a) 

Contracting States undertake that when a mutual agreement procedure has been 
initiated, the competent authority of the country in which a tax assessment, i.e. 
a final decision of the tax administration on the income, or equivalent has been 
made, or is intended to be made, which contains an adjustment that results, or 
is  likely  to  result,  in  double  taxation  within  the  meaning  of  Article 1  of  the 
Arbitration Convention, will send a position paper to the competent authorities 
of the other Contracting States involved in the case setting out: 

b) 

c) 

(i) 

the case made by the person making the request; 

(ii) 

its view of the merits of the case, e.g. why it believes that double taxation 
has occurred or is likely to occur; 

(iii)  how the case might be resolved with a view to the elimination of double 

taxation together with a full explanation of the proposal. 

The  position  paper  will  contain  a  full  justification  of  the  assessment  or 
adjustment  and  will  be  accompanied  by  basic  documentation  supporting  the 
competent  authority’s  position  and  a  list  of  all  other  documents  used  for  the 
adjustment. 

The  position  paper  will  be  sent  to  the  competent  authorities  of  the  other 
Contracting States involved in the case as quickly as possible taking account of 
the  complexity  of  the  particular  case  and  no  later  than  four  months  from  the 
latest of the following dates: 

i) 

ii) 

the  date  of  the  tax  assessment  notice,  i.e.  final  decision  of  the  tax 
administration on the additional income, or equivalent; 

the  date  on  which  the  competent  authority  receives  the  request  and  the 
minimum information as stated under point 2 (i). 

12 

 
 
  
 
d)  Contracting States undertake that, where a competent authority of a country in 
which no tax assessment or equivalent has been made, or is not intended to be 
made,  which  results,  or  is  likely  to  result,  in  double  taxation  within  the 
meaning  of  Article 1  of  the  Arbitration  Convention,  e.g.  due  to  a  transfer 
pricing adjustment, receives a position paper from another competent authority 
it will respond as quickly as possible taking account of the complexity of the 
particular case and no later than six months after receipt of the position paper. 

e) 

The response should take one of the following two forms: 

(i) 

(ii) 

if the competent authority believes that double taxation has occurred, or 
is  likely  to  occur,  and  agrees  with  the  remedy  proposed  in  the  position 
paper, it will inform the other competent authority accordingly and make 
such adjustments or allow such relief as quickly as possible; 

if  the  competent  authority  does  not  believe  that  double  taxation  has 
occurred,  or  is  likely  to  occur,  or  does  not  agree  with  the  remedy 
proposed in the position paper, it will send a responding position paper to 
the  other  competent  authority  setting  out  its  reasons  and  proposing  an 
indicative  time  scale  for  dealing  with  the  case  taking  into  account  its 
complexity. The proposal will include, whenever appropriate, a date for a 
face-to-face  meeting,  which  should  take  place  no  later  than  18  months 
from the latest of the following dates: 

aa) 

the date of the tax assessment notice, i.e. final decision of the tax 
administration on the additional income, or equivalent; 

bb) 

the date on which the competent authority receives the request and 
the minimum information as stated under point 2 (i). 

f) 

Contracting States will further undertake any appropriate steps to speed up all 
procedures  wherever  possible.  In  this  respect,  Contracting  States  should 
envisage to organise regularly, and at least once a year, face-to-face-meetings 
between  their  competent  authorities  to  discuss  pending  mutual  agreement 
procedures (provided that the number of cases justifies such regular meetings). 

3.4  Double tax treaties between Member States 

As far as transfer pricing cases are concerned, Member States are recommended to 
apply the provisions of points 1 to 3 also to mutual agreement procedures initiated in 
accordance with Article  25 (1) of  the OECD Model Convention on Income and  on 
Capital, implemented in the Double tax treaties between Member States. 

4. 

Proceedings during the second phase of the Arbitration Convention 

4.1  List of independent persons  

a) 

Contracting States commit themselves to inform without any further delay the 
Secretary  General  of  the  Council  of  the  European  Union  of  the  names  of  the 
five  independent  persons  of  standing,  eligible  to  become  a  Member  of  the 
advisory  commission  as  referred  to  in  Article  7  (1)  of  the  Arbitration 
Convention and inform, under the same conditions, of any alteration of the list. 

13 

 
 
  
 
b)  When  transmitting  the  names  of  their  independent  persons  of  standing  to  the 
Secretary  General  of  the  Council  of  the  European  Union,  Contracting  States 
will  join  a  curriculum  vitae  of  those  persons,  which  should,  among  other 
things, describe their legal, tax and especially transfer pricing experience.  

c) 

d) 

e) 

Contracting States may also indicate on their list those independent persons of 
standing who fulfil the requirements to be elected as Chairman. 

The  Secretary  General  of  the  Council  will  address  every  year  a  request  to 
Contracting  States  to  confirm  the  names  of  their  independent  persons  of 
standing and/or give the names of their replacements. 

The aggregate list of all independent persons of standing will be published on 
the Council’s web-site. 

4.2  Establishment of the advisory commission  

a)  Unless  otherwise  agreed  between  the  Contracting  States  concerned,  the 
Contracting State that issued the first tax assessment notice, i.e. final decision 
of the tax administration on the additional income, or equivalent which results, 
or is likely to result, in double taxation within the meaning of Article 1 of the 
Arbitration Convention, takes the initiative for the establishment of the advisory 
commission  and  arranges  for  its  meetings,  in  agreement  with  the  other 
Contracting State.  

b) 

c) 

d) 

e) 

The advisory commission will normally consist of two independent persons of 
standing  in  addition  to  its  Chairman  and  the  representatives  of  the  competent 
authorities. 

The  advisory  commission  will  be  assisted  by  a  Secretariat  for  which  the 
facilities  will  be  provided  by  the  Contracting  State  that  initiated  the 
establishment  of  the  advisory  commission  unless  otherwise  agreed  by  the 
Contracting  States  concerned.  For  reasons  of  independence,  this  Secretariat 
will  function  under  the  supervision  of  the  Chairman  of  the  advisory 
commission.  Members  of  the  Secretariat  will  be  bound  by  the  secrecy 
provisions as stated in Article 9 (6) of the Arbitration Convention. 

The place where the advisory commission meets and the place where its opinion 
is to be delivered may be determined in advance by the competent authorities of 
the Contracting States concerned. 

Contracting  States  will  provide  the  advisory  commission  before  its  first 
meeting, with all relevant documentation and information and in particular all 
documents,  reports,  correspondence  and  conclusions  used  during  the  mutual 
agreement procedure. 

4.3  Functioning of the advisory commission 

a)  A  case  is  considered  to  be  referred  to  the  advisory  commission  on  the  date 
when  the  Chairman  confirms  that  its  members  have  received  all  relevant 
documentation and information as specified under point 4.2 e). 

14 

 
 
  
 
b) 

c) 

The  proceedings  of  the  advisory  commission  will  be  conducted  in  the  official 
language or languages of the Contracting States involved, unless the competent 
authorities decide otherwise by mutual agreement, taking into account the wishes 
of the advisory commission. 

The advisory commission may request from the party from which a statement or 
document emanates to arrange for a translation into the language or languages in 
which the proceedings are conducted. 

d)  Whilst respecting the provisions of Article 10 of the Arbitration Convention, the 
advisory  commission  may  request  the  Contracting  States  and  in  particular  the 
Contracting State that issued the first tax assessment notice, i.e. final decision of 
the tax administration on the additional income, or equivalent which resulted or 
may result in double taxation within the meaning of Article 1, to appear before 
the advisory commission.  

e) 

The costs of the advisory commission procedure, which will be shared equally 
by  the  Contracting  States  concerned,  will  be  the  administrative  costs  of  the 
advisory  commission  and  the  fees  and  expenses  of  the  independent  persons  of 
standing. 

f) 

Unless  the  competent  authorities  of  the  Contracting  States  concerned  agree 
otherwise: 

i) 

ii) 

the  reimbursement  of  the  expenses  of  the  independent  persons  of 
standing will be limited to the reimbursement usual for high ranking civil 
servants  of  the  Contracting  State  which  has  taken  the  initiative  to 
establish the advisory commission; 

the fees of the independent persons of standing will be fixed at Euro 1000 
per  person  per  meeting  day  of  the  advisory  commission,  and  the 
Chairman  will  receive  a  10%  higher  fee  than  the  other  independent 
persons of standing. 

g)  Actual  payment  of  the  costs  of  the  advisory  commission  procedure  will  be 
made  by  the  Contracting  State  which  has  taken  the  initiative  to  establish  the 
advisory  commission,  unless  the  competent  authorities  of  the  Contracting 
States concerned decide otherwise. 

4.4  Opinion of the advisory commission 

Contracting States would expect the opinion to contain:  

a) 

the names of the members of the advisory commission; 

b) 

the request; the request contains: 

– 

– 

– 

the names and addresses of the enterprises involved;  

the competent authorities involved;  

a description of the facts and circumstances of the dispute; 

15 

 
 
  
 
– 

a clear statement of what is claimed; 

c) 

a short summary of the proceedings; 

d) 

the arguments and methods on which the decision in the opinion is based; 

e) 

f) 

g) 

h) 

the opinion; 

the place where the opinion is delivered; 

the date on which the opinion is delivered; 

the signatures of the members of the advisory commission. 

The decision of the competent authorities and the opinion of the advisory commission 
will be communicated as follows: 

i) 

ii) 

Once  the  decision  has  been  taken,  the  competent  authority  to  whom  the  case 
was presented will send a copy of the decision of the competent authorities and 
the opinion of the advisory commission to each of the enterprises involved. 

The competent authorities of the Contracting States can agree that the decision 
and  the  opinion  may  be  published  in  full,  they  can  also  agree  to  publish  the 
decision  and  the  opinion  without  mentioning  the  names  of  the  enterprises 
involved and with deletion of any further details that might disclose the identity 
of  the  enterprises  involved.  In  both  cases,  the  enterprises'  consent  is  required 
and prior to any publication the enterprises involved must have communicated 
in writing to the competent authority to whom the case was presented that they 
do not have objections to publication of the decision and the opinion.  

iii)  The  opinion  of  the  advisory  commission  will  be  drafted  in  three  original 
copies, two to be sent to the competent authorities of the Contracting States and 
one to be transmitted to the Secretariat General of the Council for archiving. If 
there is agreement on the publication of the opinion, the Secretariat General of 
the  Council  will  request  publication  in  the  Official  Journal  of  the  European 
Union. 

5. 

Suspension  of  tax  collection  during  cross  border  dispute  resolution 
procedures  

Member  States  are  recommended  to  take  all  necessary  measures  to  ensure  that  the 
suspension of tax collection during cross-border dispute resolution procedures under 
the  Arbitration  Convention  can  be  obtained  by  enterprises  engaged  in  such 
procedures,  under 
in  a  domestic 
appeals/litigation procedure although these measures may imply legislative changes 
in some Member States. It would be appropriate for Member States to extend these 
measures to the cross-border dispute resolution procedures under double tax treaties 
between Member States. 

the  same  conditions  as 

those  engaged 

16 

 
 
  
 
6.  Accession of new EU Member States to the Arbitration Convention  

Member  States  will  endeavour  to  sign and ratify the  Accession  Convention of  new 
EU  Member  States  to  the  Arbitration  Convention,  as  soon  as  possible  and  in  any 
event no later than two years after their accession to the EU. 

7. 

Final provisions  

In order to ensure the even and effective application of the Code, Member States are 
invited to report to the Commission on its practical functioning every two years. On 
the basis of these reports, the Commission intends to report to the Council and may 
propose a review of the provisions of the Code. 

17 

 
 
  
 
ANNEX III: REPORT ON THE ACTIVITIES OF THE EU JOINT TRANSFER 

PRICING FORUM IN THE FIELD OF BUSINESS TAXATION 
OCTOBER 2002 – DECEMBER 2003 

1. 

SUMMARY  OF  THE  PROCEEDINGS  OF  THE  MEETINGS  OF  THE EU JOINT TRANSFER 
PRICING FORUM 

1.1. 

Inaugural meeting 

The  inaugural  meeting  of  the  EU  Joint  Transfer  Pricing  Forum  (hereafter:  JTPF) 
under the Chairmanship of Mr. Bruno Gibert, was held on 3 October 2002 and was 
mainly  devoted  to  the  discussion  and  adoption  of  internal  rules  of  procedure,  the 
election  of  Vice-Chairpersons  for  the  Member  States  and  business  representatives 
and  the  discussion  of  an  issues  paper  in  order  to  establish  a  two–year  working 
programme as suggested by the Council conclusions of 11 March 2002. 

The internal rules of procedure were adopted by consensus. Business experts elected 
Mr. Guy Kersch, Director European Taxes of Pharmacia S.A., Luxemburg, and tax 
administration  experts  elected  Mrs.  Montserrat  Trape  Viladomat,  Deputy  Head  of 
the International Taxation Unit from Spain as Vice-Chairpersons. 

The  draft  two-year  working  program  was  discussed  and  with  some  minor 
amendments  subsequently  approved  in  the  second  meeting.  The  discussion  showed 
that most Members were of the opinion that, in line with the Council conclusions of 
11 March 2001, the highest priority should be attributed to practical solutions for a 
more  uniform  application  of  the  Arbitration  Convention  in  order  to  achieve  more 
certainty  as  regards  the  procedural  issues  of  the  Arbitration  Convention.5  That 
included both the first phase of the Arbitration Convention, i.e. the mutual agreement 
procedure, and the second phase, i.e. the arbitration itself.  

The prevailing view of the Members of the JTPF was that the issue of documentation 
requirements for transfer prices should also be addressed by the JTPF. 

It  was  also  concluded  that  despite  the  demand  for  Advance  Pricing  Agreements 
(APA) from businesses, APAs faced quite some scepticism and criticism because of 
the shortcomings linked to them. The JTPF should therefore in the first place study 
other  procedural  means  to  enable  taxpayers  to  achieve  greater  certainty  and  in 
particular  the  possibility  of  prior  consultation  between  tax  administrations  before 
making  adjustments.  Both  issues  should  be  examined  together  but  were  attributed 
lower priority.  

5 

Convention 90/436/EEC of 23 July 1990 on the elimination of double taxation in connection with the 
adjustment of profits of associated enterprises, OJ L 255, 20.8.1990, p. 10-24. 

18 

 
 
  
 
                                                 
1.2. 

Subsequent meetings 

Following  its  agreed  two–year  working  program,  the  JTPF  examined  during  its 
meetings on 4 December 2002, 2 April 2003, 19 June 2003, 11 September 2003 and 
11  December  2003  procedural  issues  related  to  the  improvement  of  the  practical 
functioning  of  the  Arbitration  Convention  and  certain  related  aspects  of  mutual 
agreement  procedures  (MAP)  under  double  tax  treaties  between  Member  States. 
Discussions included the procedures to be followed during the interim period when 
not all Member States have ratified the 1999 Protocol extending the Convention (of 
which  the  application  ended  on  31 December 1999),  the  starting  point  of  the  three-
year  period,  which  is  the  deadline  to  present  a  case  to  a  competent  authority 
(Art. 6.1), the starting point of the two-year period foreseen for the mutual agreement 
procedure, i.e. the first phase provided for in the Arbitration Convention, (Art. 7.1), 
proceedings  during  this  mutual  agreement  procedure  (expediting  the  procedure, 
suspension of tax collection, interest charges and refunds, transparency and taxpayer 
participation), proceedings of the arbitration i.e. after the MAP the second phase of 
the Arbitration Convention (Art. 7 to 11) and the interaction of the mutual agreement 
procedure and arbitration with administrative and judicial appeals.(Art. 7.3) 

In  accordance  with  its  two-year  working  program,  the  JTPF  began  to  discuss  in 
December 2003, the issue of transfer pricing documentation requirements.  

1.3. 

Conclusions 

The  JTPF  made  substantial  progress  on  the  procedural  issues  related  to  the 
improvement of the  practical functioning of the Arbitration Convention and related 
issues  of  the  mutual  agreement  procedures  under  double  tax  treaties  between 
Member  States.  Taking  into  account  the  potential  benefit  both  for  businesses  and 
national  tax  administrations  of  a  rapid  implementation  of  its  conclusions  and 
recommendations, the JTPF decided to submit to the Commission an interim report 
on its activities so far. 

Having regard to what follows, the JTPF was of the opinion that the best way to deal 
with  its  various  conclusions  and  recommendations,  was  to  propose  a  Code  of 
Conduct for the implementation of Convention 90/436/EEC of 23 July 1990 on the 
elimination  of  double  taxation  in  connection  with  the  adjustment  of  profits  of 
associated  enterprises  and  on  certain  aspects  of  the  mutual  agreement  procedures 
under Double Tax Treaties between Member States, as presented in Annex II to this 
report. The Commission could propose to the Council to adopt this Code of Conduct. 

19 

 
 
  
 
2. 

2.1. 

CONCLUSIONS AND RECOMMENDATIONS ON ISSUES RELATED TO THE ARBITRATION 
CONVENTION  AND  ON  CERTAIN  RELATED  ISSUES  OF  MUTUAL  AGREEMENT 
PROCEDURES UNDER DOUBLE TAX TREATIES BETWEEN MEMBER STATES 

Proceedings  during  the  interim  period  when  not  all  contracting  states  have 
ratified  the  Accession  Convention  of  the  Republic  of  Austria,  the  Republic  of 
Finland  and  the  Kingdom  of  Sweden  (Accession  Convention)  and  the  Protocol 
amending the original Convention (Prolongation Protocol) 

In  spite  of  the  signature  of  the  relevant  instruments  on  25  May  1999  and 
21 December 1995 respectively, so far, Italy and Portugal still have not ratified the 
Prolongation Protocol and Greece has not ratified the Accession Convention.  

The  Arbitration  Convention  has  therefore  not  been  in  force  since  1 January 2000. 
Associated companies are thus unable to rely on this instrument to avoid or remedy 
double taxation.  

The JTPF examined the different practical situations and problems which can occur 
during  this  interim  period  and  the  possible  consequences  on  the  implementation  of 
the Arbitration Convention when it re-enters into force. 

2.1.1.  Procedure  in  cases  where  a  request  has  been  made  by  a  taxpayer  before 

1 January 2000 

All Member States except Denmark will complete cases, which have been initiated 
under the Arbitration Convention prior to 1 January 2000, according to the rules of 
the  Arbitration  Convention.  Denmark,  however,  continues  MAP  procedures  under 
the  pertinent  double  tax  treaty.  Two  other  Member  States  also  consider  that  the 
procedures under the Arbitration Convention are suspended while the Convention is 
not in force but have no cases that were submitted before 1 January 2000. 

2.1.2.  Procedure in cases where a request is made by a taxpayer after 1 January 2000 

There is consensus that a taxpayer’s request to invoke the Arbitration Convention is 
in principle valid under the Prolongation Protocol. This means that an enterprise may 
present a case to a competent authority but that in practice there is no time limit for 
the MAP nor for initiating the arbitration phase.  

The multitude of possible positions as regards the implementation of the Arbitration 
Convention during the interim period, including both the MAP and arbitration phase, 
reflected in Annex I to this report, highlights the legal uncertainty for companies to 
make use of the Arbitration Convention and in particular to see the arbitration phase 
applied. 

All Member States, however, initiate a MAP either under the rules of the Arbitration 
Convention (if the other Member State agrees, see Annex I) or under the double tax 
treaty with the other Member State. 

The majority of Members supports the idea that time spent on a MAP under a double 
tax treaty should be subtracted from the 2-year period foreseen in Article 7 (1) of the 
Arbitration Convention once the competent authorities initiate or continue the MAP 
under the Arbitration Convention. 

20 

 
 
  
 
A  detailed  overview  of  Member  States  positions  can  be  found  in  Annex  I  to  this 
report.  

2.1.3.  Conclusions 

Although the JTPF found it useful to clarify the approaches of the different national 
tax  authorities  during  the  interim  period,  Members  concluded,  considering  the 
transitional  nature  and  the  limited  impact  of  the  interim  period,  not  to  issue  any 
proposals or recommendations having regard to this period. 

2.2. 

The  starting  point  of  the  three-  and  two-year  periods  enshrined  in  the  first 
phase of the Arbitration Convention 

2.2.1.  The  starting  point  of  the  three-year  period  (deadline  for  submitting  the  request 
according  to  Article  6  (1)  of  the  Arbitration  Convention  and  Article  25  (1)  of  the 
OECD Model Tax Convention) 

Article  6  (1)  of  the  Arbitration  Convention  provides  that  “…The  case  must  be 
presented within three years of the first notification of the action which results or is 
likely to result in double taxation within the meaning of Article 1.” 

All Member States favour: ”the date of the first tax assessment notice or equivalent 
which results, or is likely to result, in double taxation within the meaning of Article 
1, e.g. due to a transfer pricing adjustment”6 as the definition for the relevant action 
that triggers the starting point for the three-year period.  

Member  States’  definitions  of  this  relevant  event  in  the  national  language  and  in 
English  are  set  out  in  the  Annex  to  the  draft  Code  of  Conduct  as  presented  in 
Annex II to this report. 

The OECD Model Tax Convention on Income and Capital, which is the basis of all 
double tax treaties between EU Member States, contains in its Article 25 (1) a similar 
wording as the Arbitration Convention in its Article 6 (1) as regards the time limits to 
present a case of double taxation to the competent authorities. 

As a matter of coherence and as far as transfer pricing cases are concerned, the JTPF 
therefore recommends Member States to apply the definition of the start of the three-
year period, as specified in the Annex to the draft Code of Conduct, also to double 
tax treaties between Member States.  

2.2.2.  The starting point of the two-year period (Article 7 (1) of the Arbitration Convention) 

The Arbitration Convention does not provide in its Articles 6 (1) nor 7 (1) for any 
specific requirement, except the “presentation or submission of a case”, to start the 
two-year  mutual  agreement  period.  During  this  period,  the  relevant  competent 
authorities should seek, under a MAP, an agreement to eliminate the double taxation 
without the need to initiate the arbitration phase of the Arbitration Convention.  

6 

The tax authority Member from Italy considers "the date of the first tax assessment notice or equivalent 
reflecting a transfer pricing adjustment which results, or is likely to result, in double taxation within the 
meaning of Article 1” as the starting point of the three-year period, since the application of the existing 
Arbitration Convention should be limited to those cases where there is a transfer pricing “adjustment”. 

21 

 
 
  
 
                                                 
The JTPF has recognised that for “a case” to be considered as being “presented” or 
“submitted”  and  in  order  to  provide  a  sufficient  base  to  permit  the  competent 
authority to assess whether a complaint is “well-founded” (which is, as defined under 
Article  6.2  of  the  Arbitration  Convention,  a  prior  condition  to  initiate  a  mutual 
agreement  procedure),  a  minimum  of  information,  as  defined  in  chapter  2  of  the 
Code of Conduct, from the taxpayer is necessary. Besides this minimum information, 
the competent authority should be entitled, within two months from the receipt of the 
taxpayer's  request,  to  ask  for  specific  additional  information  before  the  two-year 
period starts. In case the competent authority does not issue such a request, the two-
year period starts on the date as indicated in the Code of Conduct.  

Without questioning the reliability and good faith of the information provided by a 
large  majority  of  enterprises,  the  JTPF  would  also  like  to  stress  the  need  for  tax-
payers’  full  co-operation  to  maximise  the  possibilities  of  reaching  a  mutual 
agreement as quickly as possible. This co-operation should not only be limited to the 
initiation  of  the  procedure  but  should  be  ensured  throughout  the  whole  mutual 
agreement procedure. The JTPF is also of the opinion that this co-operation should 
not  only  be  ensured  by  the  enterprise  that  has  presented  the  case,  but  also  by  the 
other parties to the relevant transactions, and that failure to do so could result in the 
procedure taking longer than would otherwise have been the case.  

2.3. 

Proceedings during the first phase of the Arbitration Convention 

Once the competent authorities have received all necessary information to enable a 
decision to be made as to whether the case appears to be well founded (see 2.2.2), the 
two-year period during which a mutual agreement between the competent authorities 
on the elimination of double taxation should be reached starts. 

The  JTPF  is  of  the  opinion  that  the  proposal  of  a  tentative  time  scale  for  MAPs, 
including  the  moment  of  exchange  of  position  papers,  could  be  useful  to  improve 
timing of the different actions, co-ordination and speeding-up of proceedings. 

Furthermore  it  is  agreed  as  a  general  principle,  that  all  appropriate  means  for 
reaching a mutual agreement as expeditiously as possible should be considered and 
that standards of best practice as regards the use of language and information of the 
taxpayer should be set.  

There  is  consensus  that  taxpayers  should  not  be  granted  the  right  to  be  present  at 
competent  authority  discussions.  Most  Members  agree  that  on  the  request  of  a 
taxpayer, a presentation to its competent authority should be granted.  

As far as transfer pricing cases are concerned, and without prejudice to arrangements 
on a more global level, the JTPF recommends Member States to apply the provisions 
of  the  Code  of  Conduct  related  to  MAPs  under  the  Arbitration  Convention  also  to 
double tax treaties between Member States.  

2.4. 

Proceedings  during  the  second  phase  of  the  Arbitration  Convention: 
establishment and functioning of the advisory commission 

The JTPF concluded that Articles 7, 9, 10, 11 and 12 of the Arbitration Convention, 
which relate to the functioning of the arbitration procedure (the second phase of the 
Convention), are not sufficiently detailed to guarantee  a smooth functioning of this 
procedure.  

22 

 
 
  
 
According  to  information  provided  by  the  Council’s  Secretariat  General,  the  JTPF 
established that in September 2003, five Contracting States (Greece, Finland, Ireland, 
Portugal  and  Sweden)  have  so  far  not  nominated  their  independent  persons  of 
standing, eligible to become a Member of the advisory commission as referred to in 
Article 7 (1) of the Convention. Other Contracting States’ nomination lists date from 
shortly  after  the  adoption of the Convention in 1990 which puts into question their 
current value.  

There are no detailed rules on the practical organisation of the arbitration phase, e.g. 
which competent authority takes the initiative to establish the advisory commission, 
where  does  the  advisory  commission  meet,  who  provides  the  facilities  for  a 
secretariat, when is a case considered as being referred to the advisory commission, 
what is the level of fees of the Members and Chairman, what will be the content of 
the opinion and what are the conditions for its publication, etc. 

Based  on  the  work  already  undertaken  by  the  Council  working  group  on  financial 
questions in 1996/1997 and the recent experience  of certain Contracting States, the 
JTPF agreed by consensus on a modus operandi for the arbitration phase, as reflected 
in chapter 4 of the draft Code of Conduct presented in Annex II to this report. 

2.5. 

Interaction  of  the  mutual  agreement  and  arbitration  procedure  with 
administrative and judicial appeals 

The JTPF also examined the links between both types of procedures as reflected in 
the Article 7 of the Arbitration Convention.  

A  first  point  of  concern  was  the  provision  of  Article  7 (1)  second  subparagraph 
which  provides  that  “Enterprises  may  have  recourse  to  the  remedies  available  to 
them  under  the  domestic  law  of  the  Contracting  States  concerned;  however,  where 
the case has so been submitted to a court or tribunal, the term of two years referred 
to in the first subparagraph shall be computed from the date on which the judgement 
of the final court of appeal was given”. 

Business experts were of the view that the independence of the two remedies is very 
limited insofar as – in the event that the domestic judicial remedy is activated – the 
most  important  phase  of  the  Arbitration  Convention  (the  setting  up  of  the  advisory 
commission)  may  be  pursued  only  after  the  domestic  judicial  remedy  has  been 
exhausted  and  the  two-year  mutual  agreement  period  has  elapsed.  Moreover,  some 
national tax authorities do not seem to make a distinction between administrative and 
judicial appeal, only the latter being determined in the aforementioned Article 7 (1) 
as  being  a  reason  to  defer  the  start  of  the  two-year  period.  This  might  create  a 
significant drawback to the operation and effectiveness of the Arbitration Convention 
since it can make the total duration of the Arbitration Convention proceedings equal 
to: (i) the duration of the domestic administrative/judicial proceedings ending with a 
final judicial judgement; (ii) plus two years; (iii) plus the six months available to the 
advisory commission to deliver its opinion. 

A  similar  concern  was  expressed  by  business  as  regards  the  application  of  Article 
7 (3) of the Arbitration Convention which stipulates that ”Where the domestic law of 
a  Contracting  State  does  not  permit  the  competent  authorities  of  that  State  to 
derogate  from  the  decisions  of  their  judicial  bodies,  paragraph 1  shall  not  apply 
unless  the  associated  enterprise  of  that  State  has  allowed  the  time  provided  for 
appeal  to  expire,  or  has  withdrawn  any  such  appeal  before  a  decision  has  been 

23 

 
 
  
 
delivered”.  Although  France  and  the  United  Kingdom  are  the  only  Contracting 
States that made a formal declaration that this provision applies in their countries, a 
survey  demonstrated  that  a  large  majority  of  the  Contracting  States  (and  EU 
Acceding Countries) apply/would apply the same rules in practice. In this respect it 
needs to be noted that Art 7 (3) of the Arbitration Convention is self-executing and 
does not specifically require a formal declaration to be applicable. 

Business  members  claimed  that  the  aforementioned  provision  in  many  cases  lead 
taxpayers to withdraw their domestic judicial remedies. Considering the potential of 
the Arbitration Convention to eliminate double taxation, this should not necessarily 
create  disadvantages  to  the  taxpayer.  However,  the  choice  of  the  enterprises  to  opt 
for cross-border dispute resolution procedures instead of domestic judicial remedies 
can have an important financial impact as discussed under 2.6 hereafter.  

the  complexity  of 

Considering 
its 
recommendations  to  the  suspension  of  tax  collection  during  cross-border  dispute 
resolution procedures discussed hereafter. 

the  JTPF  decided 

issue, 

limit 

the 

to 

2.6. 

Suspension of tax collection during cross-border dispute resolution procedures 

The JTPF examined the existing rules in Member States and Acceding Countries in 
relation  to  the  suspension  of  tax  collection  during  administrative  and  judicial 
appeals/litigation.  In  almost  all  countries,  the  suspension  of  tax  collection  is 
regulated at legal level in so far as domestic procedures are concerned. These rules 
differ  however  widely  as  regards  prior  conditions,  application,  duration,  amount  of 
suspension etc. 

When  it  comes  to  rules  in  relation  to  cross-border  dispute  resolution  procedures, 
specific  legal  or  administrative  provisions  exist  only  in  few  countries.  However,  a 
significant  number  of  tax  administrations  can  suspend  the  collection  of  taxes  on  a 
discretionary basis in order to avoid double payment even if specific provisions for 
suspension during mutual agreement or arbitration procedures do not exist. 

The  absence  of  specific  or  general  rules  enabling  the  suspension  of  tax  collection 
during  cross-border  dispute  resolution,  at  least  under  the  same  conditions  as  those 
applicable  for  domestic  appeal/litigation,  creates  an  additional  financial  burden  for 
companies  facing  double  taxation  at  Community  level.  In  combination  with  the 
provisions  of  Article  7  of  the  Arbitration  Convention  on  the  interaction  between 
administrative/judicial  appeal  and  cross-border  dispute  resolution  procedures  as 
discussed under 2.5, this is regarded by the business Members of the JTPF and most 
tax authority Members as an impediment for taxpayers to request the application of 
the Arbitration Convention or mutual agreement procedures under double tax treaties 
between Member States.  

2.7. 

The accession of EU Acceding States to the Arbitration Convention 

With  the  accession  to  the  EU  of  Austria,  Finland  and  Sweden,  a  new  Convention 
allowing  these  new  Member  States  to  accede  to  the  Arbitration  Convention,  was 
signed on 21 December 1995. However since one Member States still has not ratified 
this Accession Convention (see 2.1), the Arbitration Convention has not fully entered 
into force with the Member States which joined the EU in 1995 

24 

 
 
  
 
In  order  to  avoid  another  lengthy  process  during  which  the  Arbitration  Convention 
would  not  be  applicable  throughout  the  whole  (enlarged)  EU,  the  JTPF  examined 
ways to speed up the entry into force of the Arbitration Convention in the new EU 
Member  States  following  the  forthcoming  enlargement  of  the  EU  in  May  2004.  In 
this respect, the possibilities of “provisional application” (application of Article 25 of 
the  UN  Vienna  Convention  on  the  Law  of  Treaties)  or  “entry  into  force  upon 
signature”  (Article  24  (1)  of  the  aforementioned  Vienna  Convention)  were 
envisaged.  However  since  both  possible  solutions  would  require,  in  a  majority  of 
both  current  and  future  Member  States,  ratification  by  national  parliament  they 
would not really speed up the process. 

Regrettably there seems to be no legal means to speed up the entry into force of the 
Arbitration  Convention  by  the  Acceding  States.  The  JTPF  has  agreed  therefore  by 
consensus to recommend Member States to commit to ratify the accession treaties to 
the Arbitration Convention not later than two years7 after the accession of new EU 
Member  States.  This  recommendation  is  also  contained  in  the  proposed  Code  of 
Conduct. 

2.8. 

Conclusions 

In  view  of  paragraphs  2.1  to  2.7  of  this  chapter,  the  JTPF  agreed  by  consensus  to 
invite the Commission to propose to the Council the adoption of a Code of Conduct 
for  the  implementation  of  Convention  90/436/EEC  of  23 July 1990,  on  the 
elimination  of  double  taxation  in  connection  with  the  adjustment  of  profits  of 
associated  enterprises,  and  on  certain  related  issues  of  the  mutual  agreement 
procedures under double tax treaties between Member States, as presented in Annex 
II to this report. 

3. 

OTHER  ISSUES  EXAMINED  BY  THE  JTPF  IN  RELATION  TO  DOUBLE  TAXATION 
RESULTING FROM TRANSFER PRICING ADJUSTMENTS  

3.1. 

Interest charges for back taxes and interest on tax refunds 

Most  Member  States  and  Acceding  States  have  specific  provisions  concerning 
interest charges in relation to additional back taxes for previous years and interest on 
tax refunds. The interest rates are contained in civil/commercial law or specific tax 
law  and  are,  with  some  exceptions,  regularly  being  revised  based  on  different 
criteria. Most countries apply flat interest rates. 

Starting points for the calculation of the interest (both on additional back taxes and 
tax refunds) vary widely between countries but seem coherent at national level. Tax 
authorities which allow the deduction of interest payments on additional back taxes 
as  business  expenses  also  consider  interest  received  on  tax  refunds  as  taxable 
income. For a majority of national tax administrations, however, interest is treated as 
being tax neutral (no deduction/no taxation).  

7 

The  tax  authority  Member  from  the  UK  is  in  favour  of  deleting  the  reference  to  the  two-year  period 
since Ministers sitting in the Council may not be in a position to deliver such commitment if it depends 
on action by their legislature and procedures could be completed in significantly less than two years and 
it could be unhelpful to suggest that two years might be an acceptable norm. 

25 

 
 
  
 
                                                 
A  more  important  finding  in  an  EU  context  concerns  corresponding  adjustments 
resulting from cross-border dispute resolution procedures (MAP or arbitration). None 
of the countries, except for the Netherlands, provides for the possibility to agree in a 
MAP  for  corresponding  interest  to  be  paid  to  the  company  on  its  overpaid  taxes, 
having regard to the interest charges on additional back taxes in the other Contracting 
State (and vice versa) so as to balance the interest paid and received by the company 
concerned. 

Whereas the Arbitration Convention and double tax treaties between Member states 
aim to eliminate double taxation, they do not provide for a balance of interest paid on 
back taxes and interest received on tax refunds. 

JTPF business members made a proposal on the suspension of the accrual of interest 
for  late  payment  in  mutual  agreement  and  arbitration  procedures  under  the 
Arbitration Convention.  

Considering, however, the complexity of the issue, the JTPF decided to defer more 
in-depth discussions on this to a later stage. 

3.2. 

Penalties 

A specific penalty regime in relation to transfer pricing adjustments exists in only a 
few countries. In all other countries, the general penalty regime applies. The criminal 
nature of those penalties depends in most cases on the circumstances, except in one 
country,  where  transfer  pricing  penalties  are  always  considered  to  be  of  a  criminal 
nature. So-called “monetary no-fault” penalties do not seem to be common practice 
in Member States nor Acceding States. The rules for interpretation and specification 
of the amount of penalties are somewhat mixed; some countries regulate these issues 
in detail whereas other countries leave the application of general penalty principles to 
the  discretion  of  the  tax  authorities.  However,  most  countries  provide  for  appeal 
procedures. None of the tax authorities allow the deduction of penalty payments as 
business expenses. 

Again, considering the complexity of the issue and the potential impact on domestic 
legislation,  the  JTPF  decided  to  defer  more  in-depth  discussions  on  this  to  a  later 
stage. 

4. 

CONCLUSIONS 

The  JTPF  will  continue  its  activities  in  2004  on  the  basis  of  its  agreed  two-year 
working programme. 

In accordance with the Council conclusions of 11 March 2002, the JTPF invites the 
Commission to transmit this activity report to the Council with a view to appropriate 
follow-up action. 

26 

 
 
  
 
ANNEX I: MEMBER STATES’ POSITION DURING THE INTERIM PERIOD 

             ANNEX I 

      Member States' positions during the interim period
                    (request filed after 1 January 2000)

         Arbitration Convention

  Mutual Agreement Procedure 
              (first phase)
Accept
request
and continue
under AC
if other
MS agrees

Accept 
request
but continue
under DTA

       Arbitration Procedure
           (second phase)
AC suspended
so only
taken up when
it re-enters
into force

Continue
procedure
if other
MS agrees **

Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
UK

X
X
X

X
X

X

X

X*
X
X*
X
X

X*

X

X

X
X
X
X
X

X

X

X

X
X
X

X
X

X

X

*  Only if specifically requested by the taxpayer
** If the other Member State does not agree, those Member States will - with the
   taxpayer’s consent - continue the MAP under the double taxation agreement
   with the other Member State

27 

 
 
  
 
 
ANNEX II: DRAFT CODE OF CONDUCT 

THE  COUNCIL  OF  THE  EUROPEAN  UNION AND  THE REPRESENTATIVES 
OF  THE  GOVERNMENTS  OF  THE  MEMBER  STATES,  MEETING  WITHIN 
THE COUNCIL,  

HAVING  REGARD  TO  Convention  90/436/EEC  of  23  July  1990,  on  the 
elimination  of  double  taxation  in  connection  with  the  adjustment  of  profits  of 
associated enterprises, 

ACKNOWLEDGING the need both for Member States and taxpayers to have more 
detailed rules to implement efficiently the aforementioned Convention, 

NOTING the Commission communication on the report on the activities of the EU 
Joint Transfer Pricing Forum in the field of business taxation of ……2004,  

EMPHASISING  that  the  Code  of  Conduct  is  a  political  commitment  and  does  not 
affect  the  Member  States'  rights  and  obligations  or  the  respective  spheres  of 
competence of the Member States and the Community resulting from the Treaty, 

ACKNOWLEDGING  that  the  implementation  of  this  Code  of  Conduct  should  not 
hamper solutions at more global level, 

HEREBY ADOPT THE FOLLOWING CODE OF CONDUCT: 

Without prejudice to the respective spheres of competence of the Member States 
and  the  Community,  this  Code  of  Conduct  concerns  the  implementation  of 
Convention  90/436/EEC of 23 July 1990,  on the elimination of double taxation 
in  connection  with  the  adjustment  of  profits  of  associated  enterprises  and 
certain  related  issues  of  the  mutual  agreement  procedure  under  double  tax 
treaties between Member States.  

1. 

The  starting  point  of  the  three-year  period  (deadline  for  submitting  the 
request according to Article 6 (1) of the Arbitration Convention  

The date of the “first tax assessment notice or equivalent which results or is likely to 
result  in  double  taxation  within  the  meaning  of  Article  1,  e.g.  due  to  a  transfer 
pricing adjustment”8 is considered as the starting point for the three-year period.  

Member  States’  definitions  of  the  relevant  event  in  the  national  language  and  in 
English are set out in the Annex to this Code 

As far as transfer pricing cases are concerned, Member States are recommended to 
apply these definitions also to the determination of the three-year period as provided 
for in Article 25 (1) of the OECD Model Tax Convention on Income and on Capital 
and implemented in the double tax treaties between EU Member States.  

8 

The tax authority Member from Italy considers “the date of the first tax assessment notice or equivalent 
reflecting a transfer pricing adjustment which results or is likely to result in double taxation within the 
meaning of Article 1” as the starting point of the three-year period, since the application of the existing 
Arbitration Convention should be limited to those cases where there is a transfer pricing “adjustment”. 

28 

 
 
  
 
                                                 
2. 

(i) 

The starting point of the two-year period (Article 7 (1) of the Arbitration 
Convention) 

For the purpose of Article 7 (1) of the Convention, a case will be regarded as 
having  been  submitted  according  to  Article  6  (1)  when  the  taxpayer  provides 
the following :  

a) 

b) 

c) 

d) 

e) 

f) 

g) 

identification  (such  as  name,  address,  tax  identification  number)  of  the 
enterprise  of  the  Contracting  State  that  presents  its  request  and  of  the 
other parties to the relevant transactions; 

details  of  the  relevant  facts  and  circumstances  of  the  case  (including 
details of the relations between the enterprise and the other parties to the 
relevant transactions); 

identification of the tax periods concerned; 

copies  of  the  tax  assessment  notices,  tax  audit  report  or  equivalent 
leading to the alleged double taxation; 

details of any appeals and litigation procedures initiated by the enterprise 
or  the  other  parties  to  the  relevant  transactions  and  any  court  decisions 
concerning the case; 

an  explanation  by  the  enterprise  of  why  it  thinks  that  the  principles  set 
out in Article 4 of the Arbitration Convention have not been observed; 

an  undertaking  that  the  enterprise  shall  respond  as  completely  and 
quickly as possible to all reasonable and appropriate requests made by a 
competent  authority  and  have  documentation  at  the  disposal  of  the 
competent authorities; and 

h) 

any specific additional information requested by the competent authority 
within two months upon receipt of the taxpayer’s request. 

(ii)  The two-year period starts on the latest of the following dates: 

a) 

b) 

the  date  of  the  tax  assessment  notice,  i.e.  a  final  decision  of  the  tax 
administration on the additional income, or equivalent; 

the  date  on  which  the  competent  authority  receives  the  request  and  the 
minimum information as stated under point 2 (i). 

3.  Mutual agreement procedures under the Arbitration Convention 

3.1  General provisions 

a) 

The  arm’s  length  principle  will  be  applied,  as  promulgated  by  the  OECD, 
without  regard  to  the  immediate  tax  consequences  for  any  particular 
Contracting State. 

b)  Cases will be resolved as quickly as possible having regard to the complexity 

of the issues in the particular case in question. 

29 

 
 
  
 
c)  Any  appropriate  means  for  reaching  a  mutual  agreement  as  expeditiously  as 
including  face-to-face  meetings,  will  be  considered;  where 
possible, 
appropriate,  the  enterprise  will  be  invited  to  make  a  presentation  to  its 
competent authority. 

d) 

e) 

Taking into account the provisions of this Code, a mutual agreement should be 
reached within two years of the date on which the case was first submitted to 
one of the competent authorities in accordance with point 2 (ii) of this Code. 

The  mutual  agreement  procedure  should  not  impose  any  inappropriate  or 
excessive compliance costs on the person requesting it, or on any other person 
involved in the case. 

3.2  Practical functioning and transparency  

a) 

b) 

c) 

d) 

e) 

In  order  to  minimise  costs  and  delays  caused  by  translation,  the  mutual 
agreement procedure, in particular the exchange of position papers, should be 
conducted  in  a  common  working  language,  or  in  a  manner  having  the  same 
effect, if the competent authorities can reach agreement on a bilateral basis.  

The  enterprise  requesting  the  mutual  agreement  procedure  will  be  kept 
informed  by  the  competent  authority  to  which  it  made  the  request  of  all 
significant developments that affect it during the course of the procedure. 

The confidentiality of information relating to any person that is protected under 
a  bilateral  tax  convention  or  under  the  law  of  a  Contracting  State  will  be 
ensured. 

The  competent  authority  will  acknowledge  receipt  of  a  taxpayer’s  request  to 
initiate a mutual agreement procedure within one month from the receipt of the 
request  and  at  the  same  time  inform  the  competent  authorities  of  the  other 
Contracting  States  involved  in  the  case  attaching  a  copy  of  the  taxpayer’s 
request.  

If  the  competent  authority  believes  that  the  enterprise  has  not  submitted  the 
minimum  information  necessary  for  the  initiation  of  a  mutual  agreement 
procedure  as  stated  under  point  2  (i),  it  will  invite  the  enterprise  within  two 
months  upon  receipt  of  the  request,  to  provide  it  with  the  specific  additional 
information it needs. 

f) 

Contracting  States  undertake  that  the  competent  authority  will  respond  to  the 
enterprise making the request in one of the following forms:  

(i) 

(ii) 

if the competent authority does not believe that profits of the enterprise 
are included, or are likely to be included, in the profits of an enterprise of 
another Contracting State, it will inform the enterprise of its doubts and 
invite it to make any further comments; 

if the request appears to the competent authority to be well-founded and 
it can itself arrive at a satisfactory solution, it will inform the enterprise 
accordingly  and  make  as  quickly  as  possible  such  adjustments  or  allow 
such reliefs as are justified; 

30 

 
 
  
 
(iii) 

if the request appears to the competent authority to be well-founded but it 
is  not  itself  able  to  arrive  at  a  satisfactory  solution,  it  will  inform  the 
enterprise that it will endeavour to resolve the case by mutual agreement 
with the competent authority of any other Contracting State concerned. 

g) 

If a competent authority considers a case to be well founded, it should initiate a 
mutual agreement procedure by informing the competent authority of the other 
Contracting  State  of  its  decision  and  attach  a  copy  of  the  information  as 
specified  under  point  2  (i)  of  this  Code.  At  the  same  time  it  will  inform  the 
person  invoking  the  Arbitration  Convention  that  it  has  initiated  the  mutual 
agreement procedure. The competent authority initiating the mutual agreement 
procedure  will  also  inform  -  on  the  basis  of  information  available  to  it  -  the 
competent authority of the other Contracting State and the person making the 
request whether the case was presented within the time limits provided for in 
Article 6 (1) of the Arbitration Convention and of the starting point for the two-
year period of Article 7 (1) of the Arbitration Convention.  

3.3  Exchange of position papers 

a) 

Contracting States undertake that when a mutual agreement procedure has been 
initiated, the competent authority of the country in which a tax assessment, i.e. 
a final decision of the tax administration on the income, or equivalent has been 
made, or is intended to be made, which contains an adjustment that results, or 
is  likely  to  result,  in  double  taxation  within  the  meaning  of  Article 1  of  the 
Arbitration Convention, will send a position paper to the competent authorities 
of the other Contracting States involved in the case setting out: 

b) 

c) 

(i) 

the case made by the person making the request; 

(ii) 

its view of the merits of the case, e.g. why it believes that double taxation 
has occurred or is likely to occur; 

(iii)  how the case might be resolved with a view to the elimination of double 

taxation together with a full explanation of the proposal. 

The  position  paper  will  contain  a  full  justification  of  the  assessment  or 
adjustment  and  will  be  accompanied  by  basic  documentation  supporting  the 
competent  authority’s  position  and  a  list  of  all  other  documents  used  for  the 
adjustment. 

The  position  paper  will  be  sent  to  the  competent  authorities  of  the  other 
Contracting States involved in the case as quickly as possible taking account of 
the  complexity  of  the  particular  case  and  no  later  than  four  months  from  the 
latest of the following dates: 

i) 

ii) 

the  date  of  the  tax  assessment  notice,  i.e.  final  decision  of  the  tax 
administration on the additional income, or equivalent; 

the  date  on  which  the  competent  authority  receives  the  request  and  the 
minimum information as stated under point 2 (i). 

31 

 
 
  
 
d)  Contracting States undertake that, where a competent authority of a country in 
which no tax assessment or equivalent has been made, or is not intended to be 
made,  which  results,  or  is  likely  to  result,  in  double  taxation  within  the 
meaning  of  Article 1  of  the  Arbitration  Convention,  e.g.  due  to  a  transfer 
pricing adjustment, receives a position paper from another competent authority 
it will respond as quickly as possible taking account of the complexity of the 
particular case and no later than six months after receipt of the position paper. 

e) 

The response should take one of the following two forms: 

(i) 

(ii) 

if the competent authority believes that double taxation has occurred, or 
is  likely  to  occur,  and  agrees  with  the  remedy  proposed  in  the  position 
paper, it will inform the other competent authority accordingly and make 
such adjustments or allow such relief as quickly as possible; 

if  the  competent  authority  does  not  believe  that  double  taxation  has 
occurred,  or  is  likely  to  occur,  or  does  not  agree  with  the  remedy 
proposed in the position paper, it will send a responding position paper to 
the  other  competent  authority  setting  out  its  reasons  and  proposing  an 
indicative  time  scale  for  dealing  with  the  case  taking  into  account  its 
complexity. The proposal will include, whenever appropriate, a date for a 
face-to-face  meeting,  which  should  take  place  no  later  than  18  months 
from the latest of the following dates: 

aa) 

the date of the tax assessment notice, i.e. final decision of the tax 
administration on the additional income, or equivalent; 

bb) 

the date on which the competent authority receives the request and 
the minimum information as stated under point 2 (i). 

f) 

Contracting States will further undertake any appropriate steps to speed up all 
procedures  wherever  possible.  In  this  respect,  Contracting  States  should 
envisage to organise regularly, and at least once a year, face-to-face-meetings 
between  their  competent  authorities  to  discuss  pending  mutual  agreement 
procedures (provided that the number of cases justifies such regular meetings). 

3.4  Double tax treaties between Member States 

As far as transfer pricing cases are concerned, Member States are recommended to 
apply the provisions of points 1 to 3 also to mutual agreement procedures initiated in 
accordance with Article  25 (1) of  the OECD Model Convention on Income and  on 
Capital, implemented in the Double tax treaties between Member States. 

4. 

Proceedings during the second phase of the Arbitration Convention 

4.1  List of independent persons  

a) 

Contracting States commit themselves to inform without any further delay the 
Secretary  General  of  the  Council  of  the  European  Union  of  the  names  of  the 
five  independent  persons  of  standing,  eligible  to  become  a  Member  of  the 
advisory  commission  as  referred  to  in  Article  7  (1)  of  the  Arbitration 
Convention and inform, under the same conditions, of any alteration of the list. 

32 

 
 
  
 
b)  When  transmitting  the  names  of  their  independent  persons  of  standing  to  the 
Secretary  General  of  the  Council  of  the  European  Union,  Contracting  States 
will  join  a  curriculum  vitae  of  those  persons,  which  should,  among  other 
things, describe their legal, tax and especially transfer pricing experience.  

c) 

d) 

e) 

Contracting States may also indicate on their list those independent persons of 
standing who fulfil the requirements to be elected as Chairman. 

The  Secretary  General  of  the  Council  will  address  every  year  a  request  to 
Contracting  States  to  confirm  the  names  of  their  independent  persons  of 
standing and/or give the names of their replacements. 

The aggregate list of all independent persons of standing will be published on 
the Council’s web-site. 

4.2  Establishment of the advisory commission  

a)  Unless  otherwise  agreed  between  the  Contracting  States  concerned,  the 
Contracting State that issued the first tax assessment notice, i.e. final decision 
of the tax administration on the additional income, or equivalent which results, 
or is likely to result, in double taxation within the meaning of Article 1 of the 
Arbitration Convention, takes the initiative for the establishment of the advisory 
commission  and  arranges  for  its  meetings,  in  agreement  with  the  other 
Contracting State.  

b) 

c) 

d) 

e) 

The advisory commission will normally consist of two independent persons of 
standing  in  addition  to  its  Chairman  and  the  representatives  of  the  competent 
authorities. 

The  advisory  commission  will  be  assisted  by  a  Secretariat  for  which  the 
facilities  will  be  provided  by  the  Contracting  State  that  initiated  the 
establishment  of  the  advisory  commission  unless  otherwise  agreed  by  the 
Contracting  States  concerned.  For  reasons  of  independence,  this  Secretariat 
will  function  under  the  supervision  of  the  Chairman  of  the  advisory 
commission.  Members  of  the  Secretariat  will  be  bound  by  the  secrecy 
provisions as stated in Article 9 (6) of the Arbitration Convention. 

The place where the advisory commission meets and the place where its opinion 
is to be delivered may be determined in advance by the competent authorities of 
the Contracting States concerned. 

Contracting  States  will  provide  the  advisory  commission  before  its  first 
meeting, with all relevant documentation and information and in particular all 
documents,  reports,  correspondence  and  conclusions  used  during  the  mutual 
agreement procedure. 

4.3  Functioning of the advisory commission 

a)  A  case  is  considered  to  be  referred  to  the  advisory  commission  on  the  date 
when  the  Chairman  confirms  that  its  members  have  received  all  relevant 
documentation and information as specified under point 4.2 e). 

33 

 
 
  
 
b) 

c) 

The  proceedings  of  the  advisory  commission  will  be  conducted  in  the  official 
language or languages of the Contracting States involved, unless the competent 
authorities decide otherwise by mutual agreement, taking into account the wishes 
of the advisory commission. 

The advisory commission may request from the party from which a statement or 
document emanates to arrange for a translation into the language or languages in 
which the proceedings are conducted. 

d)  Whilst respecting the provisions of Article 10 of the Arbitration Convention, the 
advisory  commission  may  request  the  Contracting  States  and  in  particular  the 
Contracting State that issued the first tax assessment notice, i.e. final decision of 
the tax administration on the additional income, or equivalent which resulted or 
may result in double taxation within the meaning of Article 1, to appear before 
the advisory commission.  

e) 

The costs of the advisory commission procedure, which will be shared equally 
by  the  Contracting  States  concerned,  will  be  the  administrative  costs  of  the 
advisory  commission  and  the  fees  and  expenses  of  the  independent  persons  of 
standing. 

f) 

Unless  the  competent  authorities  of  the  Contracting  States  concerned  agree 
otherwise: 

i) 

ii) 

the  reimbursement  of  the  expenses  of  the  independent  persons  of 
standing will be limited to the reimbursement usual for high ranking civil 
servants  of  the  Contracting  State  which  has  taken  the  initiative  to 
establish the advisory commission; 

the fees of the independent persons of standing will be fixed at Euro 1000 
per  person  per  meeting  day  of  the  advisory  commission,  and  the 
Chairman  will  receive  a  10%  higher  fee  than  the  other  independent 
persons of standing. 

g)  Actual  payment  of  the  costs  of  the  advisory  commission  procedure  will  be 
made  by  the  Contracting  State  which  has  taken  the  initiative  to  establish  the 
advisory  commission,  unless  the  competent  authorities  of  the  Contracting 
States concerned decide otherwise. 

4.4  Opinion of the advisory commission 

Contracting States would expect the opinion to contain:  

a) 

the names of the members of the advisory commission; 

b) 

the request; the request contains: 

– 

– 

– 

the names and addresses of the enterprises involved;  

the competent authorities involved;  

a description of the facts and circumstances of the dispute; 

34 

 
 
  
 
– 

a clear statement of what is claimed; 

c) 

a short summary of the proceedings; 

d) 

the arguments and methods on which the decision in the opinion is based; 

e) 

f) 

g) 

h) 

the opinion; 

the place where the opinion is delivered; 

the date on which the opinion is delivered; 

the signatures of the members of the advisory commission. 

The decision of the competent authorities and the opinion of the advisory commission 
will be communicated as follows: 

i) 

ii) 

Once  the  decision  has  been  taken,  the  competent  authority  to  whom  the  case 
was presented will send a copy of the decision of the competent authorities and 
the opinion of the advisory commission to each of the enterprises involved. 

If the competent authorities of the Contracting States concerned agree that the 
decision and the opinion may be published, they will only do so if both of the 
enterprises  involved  communicate  in  writing  to  the  competent  authority  to 
whom the case was presented that they do not have objections to publication of 
the decision and the opinion. With the consent of the enterprises involved, the 
competent  authorities  of  the  Contracting  States  concerned  can  also  agree  to 
publish  the  decision  and  the  opinion  without  mentioning  the  names  of  the 
enterprises involved and with deletion of any further details that might disclose 
the identity of the enterprises involved.  

iii)  The  opinion  of  the  advisory  commission  will  be  drafted  in  three  original 
copies, two to be sent to the competent authorities of the Contracting States and 
one to be transmitted to the Secretariat General of the Council for archiving. If 
there is agreement on the publication of the opinion, the Secretariat General of 
the  Council  will  request  publication  in  the  Official  Journal  of  the  European 
Union. 

5. 

Suspension  of  tax  collection  during  cross  border  dispute  resolution 
procedures  

Member  States  are  recommended  to  take  all  necessary  measures  to  ensure  that  the 
suspension of tax collection during cross-border dispute resolution procedures under 
the  Arbitration  Convention  can  be  obtained  by  enterprises  engaged  in  such 
procedures,  under 
in  a  domestic 
appeals/litigation procedure although these measures may imply legislative changes 
in some Member States. It would be appropriate for Member States to extend these 
measures to the cross-border dispute resolution procedures under double tax treaties 
between Member States. 

the  same  conditions  as 

those  engaged 

35 

 
 
  
 
6.  Accession of new EU Member States to the Arbitration Convention  

Member  States  will  endeavour  to  sign and ratify the  Accession  Convention of  new 
EU  Member  States  to  the  Arbitration  Convention,  as  soon  as  possible  and  in  any 
event no later than two years after their accession to the EU.9 

7. 

Final provisions  

In order to ensure the even and effective application of the Code, Member States are 
invited to report to the Commission on its practical functioning every two years. On 
the  basis  of  these  reports,  the  Commission  will  report  to  the  Council  and  may 
propose a review of the provisions of the Code.  

9 

The tax authority Member from the UK tax authorities is in favour of deleting the reference to the two-
year period since Ministers sitting in the Council may not be in a position to deliver such commitment if 
it  depends on action  by  their  legislature  and  procedures  could  be  completed  in  significantly  less  than 
two years and it could be unhelpful to suggest that two years might be an acceptable norm. 

36 

 
 
  
 
                                                 
ANNEX TO THE DRAFT CODE OF CONDUCT 

The starting point of the three-year period (deadline for submitting the request 
according to Article 6 (1) of the Arbitration Convention or Article 25 (1) of the 
OECD Model Tax Convention on Income and Capital) 

Member 
State 

Implementation of the definition 
in national legislation 

Member States' translation in EN 
of their implementation of the 
definition in national legislation 

Austria 

Belgium 

Denmark 

Zustellung 

Die 
des 
[der  zu  einer 
Steuerbescheides 
Doppelbesteuerung,  z.B.  aufgrund 
einer  Verrechnungspreiskorrektur, 
führt] 

The  date  on  which  the  taxpayer 
receives  the  tax  assessment  notice  or 
equivalent  [that  results  in  double 
taxation,  e.g.  due 
transfer 
pricing adjustment] 

to  a 

The  date  on  which  the  notice  of 
assessment  is  sent  containing  the 
the  supplementary 
assessment  or 
assessment  

The  date  on  which  the  taxpayer 
receives the final assessment from the 
tax authorities 

[If  the  tax  authorities  intend  to  make 
an assessment not in accordance with 
a  tax  return,  a  notice  specifying  the 
amendment and the reason for it must 
be sent to the taxpayer. The taxpayer 
must be given a period of at least 15 
days  from  the  date  of  the  notice  to 
the 
submit 
comments 
tax 
amendment.  Hereafter 
authorities  send  the  final  assessment 
to the taxpayer.] 

on 
the 

its 

de 

La date d’envoi de l’avertissement-
comportant 
rôle 
extrait 
supplément 
le 
l’imposition  ou 
de 
d’imposition 
: 
/en  Nl. 
verzendingsdatum 
het 
aanslagbiljet  dat  de  aanslag  of  de 
aanvullende aanslag omvat  

van 

regnet 

Såfremt  skattemyndighederne  agter 
at foretage en skatteansættelse på et 
andet  grundlag  end  det,  der  er 
selvangivet,  skal  den  skattepligtige 
underrettes  skriftlig  herom.  Det 
skal  samtidig  underrettes  om,  at 
skatteyder  har  en  frist  på  mindst 
15 dage 
skrivelsens 
datering,  til  at  fremkomme  med  en 
forelåede 
imod  den 
udtalelse 
ændring  af  skatteansættelsen,  jf. 
Skattestyrelseslovens  §§  3,  stk.  4 
skattepligtige 
og  12A.Har  den 
udtalt sig inden fristens udløb, skal 
skattemyndighederne  give  skriftlig 
underretning  om  skatteansættelsen 
(kendelse). 

fra 

reguleringen 

I  Danmark  vil  den  første  endelige 
fra 
underretning 
om 
skattemyndighederne 
blive 
armslængde 
givet 
af 
kendelsen,  hvorfor  treårsfristen  i 
henhold  til  Voldgiftskonventionens 
art.  6.1  begynder  at  løbe  fra  dette 
tidspunkt. 

ved  modtagelsen 

37 

 
 
  
 
Member 
State 

Implementation of the definition 
in national legislation 

Finland 

toimenpiteestä, 
on 

Se  päivä,  jona  verovelvollinen  on 
saanut tiedon verotuspäätöksestä tai 
vastaavasta 
jolla 
siirtohinnoittelua 
oikaistu. 
(Suomessa  kysymyksessä  voi  olla 
verotus, 
säännönmukainen 
johdosta 
oikaisuvaatimuksen 
tai 
annettu 
jälkiverotuspäätös.) 

päätös 

på svenska: 

Member States' translation in EN 
of their implementation of the 
definition in national legislation 

The  date  on  which  the  taxpayer 
receives  the  tax  assessment  notice  or 
equivalent  [that  reflects  the  transfer 
pricing adjustment] 

(In  Finland:  tax  decision,  notice  of 
tax  adjustment  or  notice  of  re-
assessment) 

Dagen  då  den  skattskyldige  fått 
kännedom  om  skattebeslutet  eller 
motsvarande  åtgärd,  genom  vilken 
interna  prissättningen  har 
den 
korrigerats.  (I  Finland:  ordinarie 
om 
beskattning, 
om 
skatterättelse 
efterbeskattning) 

beslut 

beslut 

eller 

France 

•  La  date  de  réception  de 

la 
notification  de  redressements  en 
cas de procédure contradictoire,  

The date of receipt of the notification 
of  adjustments  or  the  notification  of 
basis  of  elements  of  assessments  in 
case of estimated assessment 

•  La  date  de  réception  de 

la 
ou 
des 
notification 
éléments  d’imposition  en  cas  de 
procédure d’office 

bases 

Germany 

Die  Bekanntgabe 
Bescheides, 
der 
Doppelbesteuerung führt 

des 
zu 

ersten 
einer 

The  date  on  which  the  taxpayer 
receives 
tax  assessment 
notice  or  equivalent  that  results  in 
double taxation 

the  first 

Greece 

Ireland 

 από  την  ηµεροµηνία  επίδοσης  του 
φύλλου ελέγχου 

From  the  date  of  service  (receipt)  of 
the tax assessment notice 

to 

issue 

The  date  of 
the 
the 
taxpayer  of  a  notice  of  an 
assessment,  or  of  an  amended 
assessment 
the 
determination  by  an  inspector  of 
taxes of a transfer pricing issue] 

[reflecting 

38 

 
 
  
 
 
Member 
State 

Implementation of the definition 
in national legislation 

Member States' translation in EN 
of their implementation of the 
definition in national legislation 

Italy10 

"Avviso di accertamento" 

Per  avviso  di  accertamento  si 
intende  l’atto  scritto  con  il  quale 
fiscale 
l’Amministrazione 
comunica  al  contribuente  di  aver 
accertato  un  reddito 
imponibile 
maggiore  del  reddito  dichiarato 
oppure  un  reddito  imponibile  non 
dichiarato. 

The  date  on  which  the  taxpayer 
receives the notice of assessment that 
reflects 
pricing 
adjustment 

transfer 

the 

administration 

[«Avviso  d’accertamento»  means  a 
formal written act through which the 
the 
tax 
taxpayer  to  have  assessed  taxable 
income  that  resulted  to  be  higher 
than the declared income or that was 
not declared at all.]  

notifies 

Member 
State 

Implementation of the definition 
in national legislation 

Member States' translation in EN 
of their implementation of the 
definition in national legislation 

Luxembourg 

« Bulletin », effet: le troisième jour 
ouvrable  qui  suit  la  remise  de 
l'envoi à la poste  

Das Datum des dritten Arbeitstages 
nach Absendung des Bescheids 

The  date  of  the  third  working  day 
the 
following 
assessment 

sending  of 

the 

de 

émis 

bulletin 

provisoire, 

[Les  différents  bulletins  (bulletin 
fixation, 
d’impôt, 
séparé, 
bulletin  d’établissement 
définitif, 
bulletin 
rectificatif…..) 
par 
l’administration  des  contributions 
être 
du  Luxembourg  peuvent 
désignés  dans  le  contexte  de  la 
convention  d’arbitrage  par  le  mot 
anglais 
« bulletin », 
« assessment », 
allemand 
« Bescheid ».] 

en 
en 

Netherlands 

Navorderingsaanslag,  of  primaire 
de 
aanslag 
verrekenprijscorrectie 
is 
begrepen" 

indien 

hierin 

The  date  of  the  tax  re-assessment 
notice,  or  original  assessment  [if  it 
includes 
pricing 
adjustment] 

transfer 

the 

10 

The  definition  does  not  apply  to  requests  according  to  Article  25  (1)  of  the  OECD  Model  Tax 
Convention, as the relevant "action" triggering the starting point of the three-year period could be other 
than a transfer pricing adjustment. 

39 

 
 
  
 
 
                                                 
Portugal 

efectuada 

efectuado 

Data da notificação legal do acto de 
liquidação 
pela 
Administração  Fiscal  ou  data  da 
liquidação 
pelo 
incluir  o 
contribuinte,  quando 
ajustamento do lucro tributável que 
origine  ou  seja  susceptível  de 
tributação. 
originar  uma  dupla 
Constitui notificação o recebimento 
pelo  contribuinte  de  cópia  do 
assento do acto da liquidação 

Spain 

La fecha de la recepcion de la 
notificacion del acto de liquidación 

Member 
State 

Implementation of the definition 
in national legislation 

Date  of  legal  notification  of  the 
assessment or re-assessment act made 
by  the  tax  administration  or  the  date 
of  the  self-assessment,  if  it  includes 
the  taxable  profit  adjustment  which 
results or is likely to result in double 
taxation 

Notification means the receipt by the 
taxpayer  of  the  tax  assessment  or  re-
assessment notice 

The  date  on  which  the  taxpayer 
receives  the  tax  assessment  notice  or 
equivalent  [that  reflects  the  transfer 
pricing adjustment] 

Member States' translation in EN 
of their implementation of the 
definition in national legislation 

Sweden 

“Grundläggande beslut om årlig 
taxering” 

The date of sending of: 

the  basic  decision  on 

• 
annual taxation; 

the 

“Omprövningsbeslut” 

• 

the re-assessment decision; or 

“Eftertaxering” 

• 

the additional assessment. 

[In  Sweden  the  relevant  decision 
would  be  the  first  decision  of  the  tax 
authorities  that  results  or  is  likely  to 
result in double taxation, e.g. due to a 
transfer pricing adjustment]  

United 
Kingdom 

Whichever  is  the  more  appropriate 
of the date of issue of: 

•  a  statutory  notice  required  to 
conclude  an  assessment  and 
related appeal procedures for the 
period in question; or 

•  a  letter  of  acceptance  by  an 
officer 
to 
settlement  terms  for  the  period 
in question 

the  Board 

of 

40 

 
 
  
 
 
 
 
 
Acceding EU Countries 

Country 

Implementation of the definition 
in national legislation 

Czech 
Republic 

Doručení 
platebního 
prvního 
výměru  nebo  jiného  rozhodnutí, 
které vede ke dvojímu zdanění.  

Malta 

Id-data tan-notifika ta’ l-istima. 

Member States' translation in EN 
of their implementation of the 
definition in national legislation 

The  date  on  which  the  taxpayer 
receives 
tax  assessment 
notice  or  equivalent  that  results  in 
double taxation 

the  first 

The  date  of  the  service  (receipt)  of 
the  notice  of  assessment  [reflecting 
the transfer pricing adjustment] 

Poland 

Dzień,  w  którym  podatnik  otrzyma 
decyzję  o  wymiarze  podatku 
powodującą powstanie podwójnego 
opodatkowania 

The date on which the taxpayer 
receives the tax assessment notice or 
equivalent that results in double 
taxation 

Slovakia 

Doručenie  protokolu  o  daňovej 
kontrole  sa  považuje  za  úkon 
smerujúci na vyrubenie dane."  

The  delivery  (receipt)  of  the  record 
(protocol)  from  the  tax  inspection  is 
referred as the action resulting  in the 
tax assessment. 

41