Under German law, any assessment, including a judicial decision, may be the subject of arbitration proceedings and be adapted if the solution found in the context of the mutual agreement procedure or arbitration procedure is necessary (Article 175 bis Of the General Tax Code/Tax Code, Article 110, paragraph 2, of the Procedure Regulation of Tax/Financial Jurisdictions). In view of the fact that, in the other country, the time requirement can be calculated differently, a procedure of mutual agreement should be initiated as soon as possible, particularly if it turns out that it is not possible to reach an agreement with the tax inspector. On the basis of the guidelines of the German tax authorities, the request for a mutual agreement procedure should be applied as soon as the unfavourable double taxation appears. There is no need to wait for the tax notice to be filed. In practice, it is also recommended to inform the tax inspector of the proposed request for mutual agreement procedure where double taxation appears to be the result of an ongoing tax audit. “Common audits” are coordinated bilateral and multilateral tax controls that can be carried out within the framework of mutual assistance, at the same time as the exchange of information on … The mutual agreement reached becomes binding only if the subject approves it in writing, waives the right of appeal and withdraws all pending appeals. The mutual agreement clauses of most DBAs contain specific deadlines for submitting applications. The double taxation agreement is available on the website of the Federal Ministry of Finance. The mutual agreement procedure is designed to determine the tax debt between two countries. The partners in the process are therefore the contracting countries concerned. The applicant herself is not part of the proceedings. However, the applicant is regularly informed of the status of the procedure and the status of the procedure.
In the vast majority of cases, countries reach an agreement. Since most of Germany`s tax treaties contain a clause relating to a mutual agreement procedure, the tax treaty to eliminate double taxation can be applied. In the context of a mutual agreement procedure, the German company generally has two options: if measures from one or more countries lead to a tax that does not comply with the DBA (including double taxation), the taxpayer concerned can apply for a procedure of mutual agreement. In Germany, the Bundeszentralamt for Steuern (BZSt) is responsible for the implementation of these procedures. If all the conditions are met, the countries concerned try to resolve the tax dispute by mutual agreement. This will generally avoid double taxation. The double taxation agreement is available on the website of the Federal Ministry of Finance. Even in the event of an arbitration request, the EU review found that there could be many shortcomings in the system, including delays or lack of setting up the advisory committee and the lack of agreement on the appointment of the chairman of the advisory committee that delays or prevents the procedure. Based on the statistics of the German tax authorities, there are relatively few procedures for mutual agreement with regard to transfer pricing issues applied and initiated by Germany, in relation to the total amount of mutual agreement procedures and given the importance of transfer pricing adjustments in practice. For example, about 77 (out of 277) were opened in 2012 and about 60 (out of 267) in 2013 with respect to transfer pricing issues. However, the likelihood of the procedure being implemented and ultimately closed is relatively high. It therefore seems interesting to initiate a procedure of mutual agreement if a significant double taxation has occurred and the company seeks to eliminate such double taxation.