New rules for the solution of tax disputes. Avoiding double taxation5 September 2019
An article written by Octavian Marian, Associate
For some, it may be sooner than expected, and for others with an unpardonable delay, in the Official Gazette no. 694 / 22.08.2019 was published the Ordinance no. 19/2019 for amending and supplementing Law no. 207/2015 regarding the Fiscal Procedure Code (hereinafter “Ordinance no. 19/2019“) which aims to declare the transposition into national legislation of the provisions of the Council Directive (EU) 2017/1852 of the 10th of October 2017 on the mechanisms for the settlement of tax disputes in the European Union (hereinafter “Directive 1852” or “Directive“). It must be said that according to the text of the Directive, Romania had an obligation to ensure the transposition of the provisions of the Directive, until the 30th of June 2019.
According to the new changes, Title IX of the Fiscal Procedure Code, formerly called “The amicable procedure for avoiding/eliminating double taxation” is renamed in “Solving the tax disputes generated by the interpretation and application of the agreements and conventions that provide for the avoidance/elimination of double taxation”.
Naturally, identical to the objective of the Directive, Ordinance no. 19/2019 aims to provide a legal framework for the taxpayer in order to eliminate different interpretation or application of the provisions of bilateral tax agreements and conventions, which provide for the elimination of double taxation. In this respect, by transposing the provisions of the Directive into the Romanian law, a dispute settlement mechanism is established between the Member States, where different interpretations and applications regarding the revenues and, as the case may be, the capital of the contributing companies appear.
START OF PROCEDURE. FORM OF THE COMPLAINT
According to the new legal provisions, after the affected person (hereinafter referred to as the “taxpayer“) receives a taxation decision, which creates double taxation, he has the right to file with ANAF a complaint regarding the litigation issue, requesting its settlement.
It should be mentioned that under the sanction of rejection, the complaint must be filed within 3 years, a period that commences from the moment of the communication of the tax decision, which has as a result or which will have as a result, a litigious matter.
It should be noted that the complaint must be submitted simultaneously to ANAF and to the competent authorities of the other Member States involved. From this perspective, we observe that the effort made by the taxpayer is double and that each complaint and the related documents must be drafted or translated into the language accepted by the Member State involved, in Romania, only documents in Romanian are accepted.
Regarding the content of the complaint, it must include all the taxpayer’s identification data, the tax periods envisaged, the description of the relevant circumstances that led to the dispute, the indication of incidental agreements or conventions, information and copies of the supporting documents that generate the dispute, but also copies of the decisions for the resolution of the appeals or of the judgments given in relation to the disputed issue (if any), a written statement of the taxpayer committing to respond as fully and as quickly as possible to all requests made by ANAF. As a sanction, in case the taxpayer’s complaint does not contain all the elements provided by the law, ANAF may decide to reject it.
After receiving the complaint, ANAF, within 3 months, if necessary, may request additional information, which is essential for the substantive examination of the disputed issue. To the extent that such information is requested, under the sanction of the rejection of the complaint, the taxpayer has the obligation that, within 3 months from receiving the request, to transmit the requested information or documents. Also, the additional information or documents made available to ANAF must be communicated to the other Member State involved in the procedure.
However, the taxpayer may refuse to provide additional information or documents, insofar as they may lead to the disclosure of a commercial, industrial or professional secret or of a commercial process or information whose disclosure would be contrary to public policy.
DECISION OF THE FISCAL AUTHORITY
The new procedural provisions provide for procedural mechanisms for amicable settlement of the disputed issue, negotiating between ANAF and the competent authority of the Member State involved, but also certain remedial procedures in case the two parties do not reach to an agreement, as we will develop further.
Thus, the fiscal authority, in this case, ANAF has the obligation that, within 6 months from the receipt of the complaint or, as the case may be, within 6 months from the receipt of the additional information requested, to decide whether:
1. ANAF accepts the complaint and starts the amicable settlement procedure
The start of the amicable settlement procedure is also conditioned by the acceptance of the complaint by the competent authority of the Member State participating in the procedure. To the extent that both ANAF and the competent authority of the Member State concerned, accept the complaint made by the taxpayer, the procedure must be completed within 2 years from the last notification of the acceptance of the complaint. For duly justified reasons, the term of 2 years can be extended by a maximum of 1 year, at the request of ANAF or the competent authority of the Member State involved.
During the amicable settlement procedure, ANAF and the competent authority of the Member State concerned, have discussions to resolve the dispute. The effective way of carrying out the amicable procedure and the way of dealing with the competent authorities of the Member State involved will be approved by order of the ANAF president.
In the event that ANAF and the competent authority of the Member State concerned reach an agreement on how to resolve the dispute, the decision to resolve the amicable procedure is communicated to the taxpayer.
An extremely important aspect to consider is the fact that the decision to settle the amicable procedure is binding and enforceable only if the taxpayer relinquishes the right to promote any other administrative or judicial remedy.
To the extent that the taxpayer is in the process of appealing the dispute, the decision to settle the amicable procedure becomes mandatory and enforceable only after the taxpayer submits to ANAF, evidence that he has taken measures to conclude them. The evidence must be submitted within 60 days from the date on which the decision was communicated to the affected taxpayer.
However, if, following the amicable settlement procedure, ANAF and the authority of the participating Member State do not reach an agreement on how to amicably resolve the dispute, as a remedy, at the request of the taxpayer or from The Office shall set up an Advisory Committee or an Alternative Dispute Resolution Committee.
The Advisory Committee
If no consensus is reached in the amicable settlement procedure, at the request of the taxpayer, made no later than 50 days from the date of receipt of the notification regarding the solution of the complaint, the Advisory Committee shall be set up. Also, the Advisory Committee may also be set up ex officio by ANAF together with the competent authority of the participating Member State.
After the request, within 120 days from the receipt of the request, the Advisory Committee, which consists of a president, an independent person appointed by ANAF, a representative from each competent authority of the Member States concerned, is set up. It should be specified that in order to support his point of view, the taxpayer may, upon request and only with the approval of ANAF, present himself or be represented before the Advisory Committee.
If the Advisory Committee is not established within 120 days, because the independent member of the committee and its alternate has not been nominated, the taxpayer can address the competent courts to carry out the appointment of the persons assigned to this role. Independent persons are chosen from a list drawn up by ANAF, which is also transmitted to the European Committee for notification.
After the establishment of the Advisory Committee, based on the functioning regulation drawn up by the authorities, following the analysis of the dispute, a simple majority of its members is issued, an opinion on how to solve the dispute. In the event that a majority cannot be constituted, the vote of the chairman of the committee is definitive. The opinion of the committee is communicated within 6 months from the date on which it was set up, a term that can be extended by a maximum of 3 months.
The Alternative Dispute Resolution Committee
The establishment of the Alternative Dispute Resolution Committee can only be carried out by ANAF together with the competent authorities of the participating Member State, being an alternative to the Advisory Committee. The composition of the dispute resolution committee may be different from the composition of the Advisory Committee.
The Alternative Dispute Resolution Committee may apply any procedure to resolve the dispute. In this regard, it is expected that the arbitration procedure with the final offer is accepted. Also, similar to the procedure of the Advisory Committee, the taxpayer may, upon request and only with the approval of ANAF, present himself or be represented before the committee for alternative dispute resolution.
At the end of the procedure, similar to the procedure carried out by the Advisory Committee, the Alternative Dispute Resolution Committee issues an opinion on the dispute, within 6 months from the date on which it was established.
2. ANAF accepts the complaint and resolves the dispute in a unilateral manner without including the authorities of the Member State concerned
In this case, the procedure for resolving the disputed matter is considered to be completed, and the disputed matter is solved according to those requested by the taxpayer through the complaint.
3. ANAF rejects the complaint with the obligation to indicate the factual and legal reasons for the rejection
In the event that the complaint was rejected by at least one of the competent authorities, but not all, for : i) lack of compulsory elements of the complaint; ii) failure of the taxpayer to provide the information requested by ANAF; iii) the absence of a litigious matter; iv) breach of the 3-year deadline for filing the complaint, at the request of the taxpayer, similar to the unfavourable completion of the amicable settlement procedure, ANAF, together with the competent authority of the Member State concerned, have the establishment of the advisory committee.
However, for setting up the advisory committee for the reasons set out in points “i)” “ii)” “iii)” “iv)” above, the taxpayer can request the initiation of this new procedure, only if: – no judicial remedy can be exercised; – there is no judicial remedy for an ongoing appeal, or he has formally renounced the exercise of this right.
In this situation, in case of setting up the Advisory Committee, if the complaint is accepted, only at the request of ANAF or the corresponding authority of the participating Member State, the amicable settlement procedure can be initiated. It should be said that in the event that none of the representatives of the Member States requests the initiation of the amicable settlement procedure, the Advisory Committee issues an opinion on how to resolve the dispute.
Also important to note is that in case of rejection of the complaint by both ANAF and the competent authority of the participating Member State, the taxpayer can appeal the decision issued by ANAF to the administrative litigation court, within 30 days upon receiving the notification of the solution and without having to go through the preliminary procedure provided by the provisions of Art. 7 of Law no. 554/2004 regarding administrative litigation. In this situation, the taxpayer can no longer request the establishment of the advisory committee.
THE FINAL DECISION
According to the new text of the law, within 6 months from the notification of the opinion of the Advisory Committee or the Alternative Dispute Resolution Committee, ANAF together with the competent authority of the participating Member State can decide as follows:
>> A final decision shall be agreed and issued in accordance with the opinion issued by the Advisory Committee or the Alternative Dispute Resolution Committee;
>> A final decision shall be agreed and issued without observance of the opinion issued by the Advisory Committee or the Alternative Dispute Resolution Committee;
>> An agreement is not reached, and a final decision is issued in accordance with the opinion issued by the Advisory Committee or the Alternative Dispute Resolution Committee.
After issuing the final decision, ANAF has the obligation that within 30 days to notify the taxpayer of the solution adopted. In case the taxpayer is not notified within 30 days, he has the right to address the courts in order to obtain the decision.
It should be noted that the final decision is binding on the Member States involved, but it does not constitute a precedent that can be used by another person interested in other cases.
However, although we are discussing a final decision, it can only be implemented if the taxpayer expressly accepts it and waives any appeal at the national level, within 60 days from the time of notification of the decision.
In case the taxpayer accepts the final decision and gives up any appeal in time, the ANAF implements the final decision and proceeds to modify the tax base, regardless of the limitation periods applicable to the dispute. To the extent that ANAF does not implement the final decision, the taxpayer may refer the court, respectively the Bucharest Court of Appeal, and request the implementation of the final decision.
THE TAXPAYER’S RIGHT TO USE DOMESTIC REMEDIES
The mechanisms for resolving the tax disputes mentioned above do not affect the taxpayer’s right to appeal to the remedies provided for by the Code of fiscal procedure and Law no. 554/2004 regarding administrative litigation. Also, the formulation of the complaint does not prevent the initiation or continuation of the administrative or criminal proceedings related to the dispute in question.
However, insofar as the taxpayer appeals to the legal remedies provided by the legal provisions, namely the formulation of the administrative appeal and subsequently of the action before the court, the deadline for issuing the ANAF decision on the complaint and the deadlines for the amicable settlement procedure, begin to run from the date on which the decisions rendered in the appeal proceedings have become final.
Moreover, it should be noted that in the situation where the court definitively rules before finalizing the amicable settlement procedure, this procedure is concluded, when ANAF notifies the court decision to the competent authority of the Member State concerned.
Another provision stipulates that if a court decides on the disputed issue before being asked to set up the advisory committee, the taxpayer can no longer use this procedure, in which case ANAF informs the competent authority of the Member State concerned. Also, ANAF shall proceed in the same manner, even if the final court decision is given after the request for the establishment of the advisory committee is formulated and before the opinion is issued by the Advisory Committee or the Alternative Dispute Resolution Committee.
It should be noted that, to the extent that the taxpayer also opts for the use of conventional remedies, ANAF may decide to suspend the procedures carried out under the new legal provisions until the time of the completion of the judicial proceedings.
Finally, we point out that the mechanisms of this new procedure concern litigation issues related to income or capital obtained in a financial year starting on or after the 1st of January, 2018.
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 Affected person – any natural or legal person having a fiscal residence in Romania or another Member State and whose taxation is directly affected by a litigious matter.