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AGN EMEA Tax Committee News
A Practical Guide to Resolving Double Taxation Cases: Germany has concluded double taxation agreements with more than 90 countries worldwide. Applying these agreements does not always lead to the avoidance of double taxation in practice but sometimes leads to tax disputes due to the respective autonomous interpretation of the agreements by the participating contracting states.
Therefore, the agreements, on a large scale, provide the possibility of conducting “mutual agreement procedures” according to Article 25 of the OECD Model Convention, by which taxpayers can request the tax authorities of the concerned countries to discuss a case jointly to avoid double taxation.
Advance Mutual Agreements: Accompanying legislation in Germany
Based on the general authorization under the treaty law to carry out mutual agreement procedures, on the German side, a national regulation for the implementation of “advance mutual agreement procedures” was introduced into procedural law on 2 June 2021 by Sec. 89a AO (General Tax Code) and further specified by decree on 26 June 2024. This legal norm is intended to achieve greater legal certainty for both companies and states, as well as greater efficiency in these procedures.
Advance Mutual Agreements: Content of the German specification
The Federal Central Tax Office (Bundeszentralamt für Steuern) is responsible for the advance mutual agreement procedures. It acts in understanding with the supreme tax authorities of the federal states.
The advance mutual agreement procedures relate to the tax assessment of a situation that has not yet materialized at the time of the application, on the basis of applicable double taxation agreements with one or more countries. These procedures may be invoked for any questions regarding the interpretation and application of double taxation agreements that have not yet been realized at the time of request and are not limited to transfer-pricing matters or to questions regarding the profit allocation in permanent establishment cases.
Only persons entitled under the double taxation agreements applicable between the contracting states are entitled to file corresponding applications for the initiation of these proceedings. The application determines the subject of the procedure. The application must present the precisely defined facts and the time frame of application. The period of validity should not exceed five years.
The mutual agreement can only be applied to the authorised party named in the agreement. It cannot be applied to comparable cases of another authorised party in the same state.
Before filing an application for an advance mutual agreement procedure, parties entitled to such an agreement can informally suggest to the Federal Central Tax Office that a non-binding preliminary meeting (so-called pre-filing meeting) be held to discuss the procedure, e.g., the requirements, and the content of the application.
The applicant has no legal right to initiate an advance mutual agreement procedure. The Federal Central Tax Office initiates procedures at its discretion.
Brought to you by the AGN EMEA Tax Committee
If you have any questions in relation to this article, please get in touch with Norbert.
Norbert Mevissen
Tax Partner I Specialist Advisor for International Tax Law
Schaffer & Partner Audit & Tax and Schaffer & Partner Legal
Web: www.schaffer-partner.de
Email: norbert.mevissen@schaffer-partner.de
Phone: (+49 911) 95 99 80