The German Ministry of Finance released its official baseline approach for negotiating double taxation agreements (DTAs) on April 18. This baseline reflects the German taxation agreement policy and serves to support German principles when the government is negotiating new or revised DTAs. The document is intended to help the German government achieve its objectives related to the taxation of international transactions, using provisions that are as consistent as possible.
One of many key elements to this baseline approach is that the German government wishes to pursue provisions that facilitate tax dispute resolution. Specifically, as a basis for negotiations, the German government would like to see a binding, compulsory arbitration procedure that is available upon request. Such a binding arbitration procedure may offer treaty partners an effective means for eliminating double taxation and may also provide a more timely process for taxpayers to resolve disputes. Germany's desire to pursue this provision is further evidence of a growing global trend – fuelled by the substantial increase in the number and size of tax audits worldwide and the increasing burden on the traditional mutual agreement procedures within DTAs.