Mutual agreement procedures aim to
- to protect the taxpayer's right to be taxed in accordance with the Convention, and
- avoid double taxation.
In principle, companies must make the request in their State of residence. In the case of a permanent establishment, the request may also be made in its State of residence.
A mutual agreement procedure will only be initiated if your request is
- is admissible and well-founded and
- double taxation cannot be remedied unilaterally.
The mutual agreement procedure clarifies the tax claims of the states involved that have double-taxed income. The only parties to the mutual agreement procedure are therefore the contracting states involved. As the applicant, you are not involved in the procedure yourself. However, they are regularly informed about the status and progress of the procedure. In the vast majority of cases, an agreement is reached between the states.
If the mutual agreement procedure between the authorities involved from 2 (or more) contracting states has not led to the elimination of your double taxation within 2 years of the initiation of the mutual agreement procedure, arbitration proceedings can be initiated upon request.
For this purpose, an advisory committee is formed, which usually consists of the following persons:
- 1 independent chairperson,
- 1 representative of each of the competent authorities, and
- an even number - as a rule 2 - of independent persons.
They have the opportunity to comment on the factual and legal situation vis-à-vis the Advisory Committee.
On completion of its work, the Advisory Committee shall deliver an opinion. The competent authorities of the Contracting States involved in the case now have time to reach agreement. They may depart from the opinion of the Advisory Committee, provided that double taxation is avoided. If they cannot agree on a different arrangement, they are bound by the Advisory Committee's opinion as an award.
At the end of the arbitration proceedings, your double taxation can be eliminated if the taxpayers involved agree to the solution and declare a waiver of appeal (compare the explanations under "Procedure").
The Federal Central Tax Office (BZSt) is the authority responsible for initiating mutual agreement procedures in Germany.
You must submit the application for the initiation of a mutual agreement procedure informally in writing to the BZSt.
In principle, companies must file the application in their state of residence. In the case of a permanent establishment, the application can also be submitted in its country of residence.