The Dispute Resolution Mechanism (DRM) is an EU Directive that lays down rules for swiftly and effectively resolving disputes related to the interpretation and application of tax treaties for both businesses and citizens. The Directive is in force as of 1 July 2019.
The Directive covers issues related to double taxation – when two or more countries tax the same income or profits of a company or person. This happens, for example, due to a mismatch in national rules or different interpretations of transfer pricing rules in a bilateral tax treaty.
The DRM provides enhanced legal certainty for citizens and businesses by requiring Member States to comply with clear deadlines to agree on a timely and binding solution.
Key aspects of the Directive
Clearly defined and enforceable obligation on Member States to resolve the dispute within a set timeline
Recourse for taxpayers to national courts to unblock procedure
Elimination of double taxation for disputes arising from a convention or agreement
Publication of final decision
Mutual Agreement Procedure (MAP)
The Mutual Agreement Procedure (MAP) is an administrative procedure between tax authorities of Member States engaged in a tax dispute. During the MAP, national authorities endeavour to resolve the dispute within 2 years, or 3 years if the procedure is extended due to a justified request.
Advisory Commission
In case the dispute is not resolved via the MAP, the taxpayer can request to set up an Advisory Commission.
The Advisory Commission is composed of the tax authorities of the Member States involved and three independent persons, one of whom acts as the Chair. These persons are drawn from a purpose-compiled list consisting of individuals nominated by Member States.
See the list of independent persons nominated for the Advisory Commission.
The national authorities sitting in the Advisory Commission must agree on Rules of Functioning that that describe details of the procedure. In case the Rules of Functioning are not notified to the taxpayer or are incomplete, the standard Rules of Functioning (Annex I, Part I) shall apply.
Once set up, the Advisory Commission must deliver its opinion within 6 months.
Final Decision
After the Advisory Commission delivers its opinion, national authorities are notified. Based on this opinion, the national authorities concerned make a final decision. If they do not manage to agree on a final decision in time, the opinion becomes binding upon those authorities.
Details of the final decisions will be published online by the Commission.
Fiscalis Project Group – Standing Committee
The Fiscalis Project Group was set up to analyse the implementation of Article 10 of the Directive. The group met six times between October 2018 and July 2019. The outcome of this analysis is presented in a report on the implementation of Article 10 of the Directive.
EU Arbitration Convention
The EU Arbitration Convention is an instrument that seeks to eliminate double taxation in connection with the adjustment of profits of associated enterprises. The Convention has a more limited scope as compared to the DRM and relates to disputes with regard to transfer pricing and attribution of profits to permanent establishments of associated enterprises.
Statistical Framework
Under the Statistical Framework of the Directive, Member States submit statistics on the four stages of the Directive for monitoring purposes:
- Complaints
- Mutual Agreement Procedure
- Arbitration
- Final Decision
Directive statistics are available for:
Review of the Directive
In accordance with Article 21 of the Dispute Resolution Mechanism Directive, the Commission shall evaluate the implementation of the Directive and present a report to the Council.
For the purposes of the 2024 review, the Commission launched a targeted consultation to get feedback on the rules governing tax dispute resolution in the EU.
On 28 October 2024 the Commission adopted an implementation report on the review of the DRM Directive.
Documents and legal texts
- Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union
- Commission Implementing Regulation (EU) 2019/652 of 24 April 2019 laying down standard Rules of Functioning for the Advisory Commission or Alternative Dispute Resolution Commission and a standard form for the communication of information concerning publicity of the final decision in accordance with Council Directive (EU) 2017/1852
Related links
- Impact assessment on Double Taxation Dispute Resolution Mechanisms in the EU (and Executive Summary)
- Action Plan for a Fair and Efficient Corporate Tax System in the EU
- Fiscalis Project Group report on the implementation of Article 10 of the Directive
- Working Party IV Workshop - Transposition of Directive (EU) 2017/1852 on tax dispute resolution mechanisms in the EU
- Press release | Fair Taxation: New EU-wide system to resolve tax disputes between Member States applies from today