Tax arbitration is envisaged under the EU Arbitration Convention and the Dispute Resolution Mechanism Directive. In both cases, arbitration may be initiated when a mutual agreement procedure (MAP) is ineffective. The scope of the Arbitration Convention is limited to transfer pricing cases based on provisions reflecting the arm’s length principle and similar rules on dealings with permanent establishments, whereas the Dispute Resolution Directive goes further and covers other double taxation issues resulting from double tax treaties. Competent tax authorities are not required to follow a position adopted by arbiters issued on the basis of the above-mentioned acts, but if they choose not to follow it, they still must eliminate double taxation.
Arbitration: The International Journal of Arbitration, Mediation and Dispute Management