The UK and Sweden have agreed a Memorandum of Understanding setting out the procedures for arbitration under Article 23 of their double taxation convention, establishing rules for taxpayer requests, arbitrator appointments, decision-making, and the implementation of arbitration outcomes in unresolved mutual agreement procedure cases.
The UK and Sweden have agreed a Memorandum of Understanding (MOU) establishing detailed procedures for conducting arbitration under Article 23 of the Convention between the UK of Great Britain and Northern Ireland and the Kingdom of Sweden for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital gains. The arrangements take effect from the later of the two signature dates and provide a framework for resolving unresolved mutual agreement procedure cases through arbitration.
The MOU sets out the rules for requesting arbitration, the minimum information taxpayers must provide, the preparation of Terms of Reference, the appointment of arbitrators, and the conduct of arbitration proceedings. It also establishes requirements for arbitrator independence and confidentiality, communication procedures, operating rules, cost-sharing arrangements, and the implementation of arbitration decisions.
Under the arrangements, taxpayers requesting arbitration must submit written requests containing specified information and confirm that no court or administrative tribunal has already decided the same issues. The competent authorities are required to follow defined timelines for preparing the Terms of Reference, appointing arbitration panel members and delivering arbitration decisions.
The MOU allows arbitration to proceed under either an Independent opinion or Final offer approach, depending on the agreement of the competent authorities. Arbitration decisions will be adopted by a simple majority of the panel and will have no precedential value.
The arrangements also specify circumstances in which arbitration decisions may be invalidated, the process for implementing decisions through a mutual agreement, and categories of cases excluded from arbitration, including cases jointly considered unsuitable for arbitration, cases covered by paragraph 3 of Article 4 of the Convention, and certain disputes involving hard-to-value intangibles.
The MOU provides that the arbitration provisions of Article 23 of the Convention apply to cases presented to the competent authority of either Contracting Jurisdiction on or after the Convention entered into force, regardless of the taxable period concerned. The arrangements remain in force indefinitely unless jointly amended by the competent authorities or terminated in line with the Convention.
