Tax Dispute Resolution Mechanism: New Bill of Law

The Bill of Law 7431 ("Bill”) introduced by the Luxembourg government on 11 April 2019  implements the European Union (“EU”) Directive 2017/1852 dated 17 October 2017 on tax dispute resolution mechanisms in the EU (“Directive”). The Bill integrates the content of the Directive to a greater extent.

The Directive meets the BEPS Action Plan 14 minimum standards and is a subsidiary to the mandatory binding arbitration clause of the Multilateral Instrument (if applicable). The objective of the Directive is to provide an efficient resolution mechanism for disputes arising between EU Member States regarding the interpretation and application of agreements and conventions that provide for the elimination of double taxation of income and, where applicable, capital (“Resolution Mechanism”). Depending on the case, disputes may be settled on a unilateral basis or a mutual agreement of the Member States involved.

The effectiveness of the Resolution Mechanism relies on strict deadline periods in each procedural phase and on an obligation for the Members States to reach a solution.