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Tax dispute resolution mechanisms in the European Union

The Italian Revenue Agency published some operational procedures for the implementation of the Legislative Decree no. 49/2020

23/12/2020

On December 17, 2020 the Revenue Agency published the regulation providing some operating procedures concerning some specific provisions of the Legislative Decree no. 49/2020 that enacted the Directive (EU) 2017/1852 on June 10, 2020.

The Directive introduced a new tax dispute resolution mechanism in the European Union that in Italy applies to questions relating to fiscal years starting from January 1, 2018.

The procedure provided by the Directive, as transposed in Italy, is particularly innovative compared to the mechanisms available so far to the extent that - among other things - provides for (i) a specific timing to be respected in the various steps of the procedure granting at the same time tools to the taxpayer to stimulate theactivity of the competent authorities; (ii) an obligation to reach an agreement on the competent authorities for all the questions deriving from the interpretation and application of agreements and conventions that provide for the elimination of double taxation of income and, where applicable, capital concluded by Italy at EU level; and (iii) the possibility to apply for the procedure also in case of settlement of the matter at domestic level.

In summary, the regulation at issue intervenes in relation to the following items: 
•    The filing of the request for applying to the procedure;
•    The request for and the filing of additional information during the preliminary phase and the mutual agreement procedure; and
•    The communication and implementation of the agreement reached by the competent authorities.
In this respect, apart from reiterating the indications already included in the Decree in terms of steps and timing of the procedure, the regulation: 
•    Defines the practical ways for filing the complaint and the communications between the Italian competent authority and the taxpayer;
•    Provides some templates to be used to draft the complain for asking the opening of the procedure and the request the set up of the Advisory commission in the cases provided by the Decree;
•    Provides specific indications for the implementation of the decision of the competent authorities on the competent tax office depending on the cases (Regional tax office, Provincial tax office or Operational Center of Pescara - COP). In this respect, it will be the same competent authority to inform the competent tax office or the COP in order to proceed with the calculation of the amount due by the taxpayer or to be reimbursed to this latter.
This last point is particularly relevant compared to the mechanism available to the taxpayer where the implementation of the agreement has never been expressly regulated, even if the indications provided by the regulations are still quite generic.

It is interesting to note that in setting the procedure to be followed by the taxpayer for accepting the agreement the regulation refers to a partial withdrawal of any litigation potentially pending in relation to the same question. This is definitely relevant and often subject to discussion in all the cases in which for example the same transfer pricing question involves different countries and the taxpayer is not interested in opening this procedure for all the countries involved preferring to continue the litigation in this respect. Unlike the case of matters different from the question subject to complain under the procedure hereby commented where it is common ground that the taxpayer can continue the litigation.

Therefore, it would be good to have a clarification by the Tax administration in this respect as well as a coordination at legislative level with the provisions regulating the tax litigation to definitively clarify the issue.

Moreover, the regulation also clarifies the procedure to be followed by the taxpayer for communicating the decision to withdraw the complain. However, the regulation does not include any indication on how to calculate and pay the expenses of the procedure that in case of withdrawal are on the taxpayer.

Finally, the regulation introduces the possibility to ask for a pre-filing meeting to the competent authority in order to obtain clarifications and indications on the procedure before the filing, similarly to what provided for the advance agreements, that is surely advisable in more complex cases.