Apply for mutual agreement procedure under the double taxation agreement (DTA)
Description
If you believe that your taxation is in breach of a double taxation agreement, you can apply for a mutual agreement procedure under certain conditions.
Mutual agreement procedures have the aim of
- protect the taxpayer's right to be taxed in accordance with the double taxation agreement (DTA), and
- avoid taxation that does not comply with a DTA (for example, double taxation).
The legal basis for mutual agreement and arbitration proceedings can be found in the respective DTAs.
A DTA is an agreement between two states which regulates the allocation of the right of taxation for cross-border income (for example, in the case of residence in one state and source of income in the other state).
Germany has concluded DTAs with over 90 countries worldwide. Most of these DTAs follow the OECD Model Convention, which is widely used internationally. In the OECD Model Convention you will find the regulations on mutual agreement procedures.
The Federal Central Tax Office (BZSt) is the authority responsible for such mutual agreement procedures in Germany.
If you are a resident of Germany, you can submit an informal application for the initiation of a mutual agreement procedure in writing to
- to your local tax office or
- directly to the BZSt
directly.
If you are not resident in Germany, you must generally submit the application for a mutual agreement procedure to the competent authority in your country.
The mutual agreement procedure under the DTAs will only be initiated if your request is
- is admissible and well-founded and
- the taxation in Germany cannot be corrected on its own.
The mutual agreement procedure clarifies or delimits the tax claims between the 2 states between which a double taxation agreement (DTA) exists. The only parties to the mutual agreement procedure are therefore the contracting states involved.
As the applicant, they are not themselves involved in the procedure. However, they are regularly informed about the status and progress of the procedure. In the vast majority of cases, a mutual agreement is reached between the states.
In addition, more recent double taxation treaties often contain provisions requiring arbitration to resolve the dispute if the competent authorities of both states fail to reach an agreement within a certain period of time (e.g. double taxation treaties with Austria, Switzerland, France, Luxembourg, the Netherlands, the USA). In this case, the dispute is then submitted to a panel of independent arbitrators for a decision. The details are regulated differently in the agreements.
Note
In the case of disputes between the member states of the European Union (EU) concerning agreements on the elimination of double taxation, you can, under certain conditions, file a complaint under the EU Double Taxation Agreement Dispute Settlement Act (EU-DBA-SBG).
Applications for the initiation of a mutual agreement procedure in accordance with double taxation agreements (DTAs) can be made
-
Individuals or companies who believe that their taxation should be
- in Germany or
- in breach of a DTA abroad and
- whose income is taxed in Germany and
-
be taxed abroad
- so that there is a risk of double taxation.
Note
If you are not a resident of Germany, you must submit your application to the competent authority in your country.
When applying for a mutual agreement procedure, you must submit:
- The name, address (registered office), tax number and local tax office of the person subject to the taxation (treaty beneficiary)
- detailed information on the facts and circumstances relevant to the case
- details of the tax periods concerned by the application
- copies of the tax assessment notices, the tax audit report or comparable documents which led to the alleged double taxation, as well as other relevant documents (e.g. contracts, applications for refund/reduction of foreign withholding tax)
- detailed information on any out-of-court or in-court appeal proceedings and any domestic or foreign court rulings concerning the case
- in cases of profit sharing between associated enterprises and in the case of permanent establishments, the information and documents which must also be submitted for an application under the EU Arbitration Convention
-
a statement by the party entitled to the agreement as to how, in its opinion, the taxation at home or abroad does not comply with the agreement
- none
Notes
Fees may be charged for pre-appraisal procedures.
Costs incurred by the applicant (for example, for the compilation of documents or for legal advice) will not be reimbursed.
- Application: within 4 years of notification of the tax measure
Note
The mutual agreement clauses of most double taxation agreements (DTAs) contain special deadlines for filing the application.
- for processing the application: the duration of mutual agreement procedures can vary greatly and depends on a number of factors. Several bodies are involved in the proceedings, both at home and abroad. Depending on the circumstances of the individual case, the duration of the proceedings can be as short as a few months or as long as several years.
- Appeal
-
Tax court action
- Forms: no
- Online procedure possible: no
- Written form necessary: yes
- Personal appearance: no
Signed, informal application in written form
You must submit the request for the initiation of a mutual agreement procedure informally in writing.
-
Compile the necessary documents and papers. Send the signed, informal application by post to
- your local tax office or
- the Federal Central Tax Office (BZSt).
-
Once the application has been received, the BZSt will first check whether the requirements for carrying out a mutual agreement procedure have been met. If
- your application is admissible and well-founded and
- it cannot be resolved in Germany,
the intergovernmental part of the mutual agreement procedure will be initiated.
- As the applicant, you are not involved in the procedure yourself. However, you will receive regular information on the status and progress of the procedure.
- As soon as an amicable settlement has been reached between Germany and the other state involved, you will receive notification of this by post.
-
The mutual agreement solution becomes binding and is implemented when you submit your
- agree in writing and
- waive the right to appeal and
- withdraw pending appeals.
Federal Ministry of Finance (BMF)
- Verständigungs- und Schiedsverfahren nach den DBA Durchführung
Remark: Anzeige der Leistung im Ursprungsportal
