Joint Transfer Pricing Forum

Chair

Bruno GIBERT(21 Kb)

Private sector members

Jesper BARENFELD(8 Kb)

Gaby BES(376 Kb)

Andrea BONZANO(13 Kb)

Brian CHAPMAN(8 Kb)

Irina DOBRE(91 Kb)

Iwona GEORGIJEW(61 Kb)

Eduardo GRACIA(32 Kb)

Lari HINTSANEN(14 Kb)

Guy A. KERSCH(163 Kb)

Alan MCLEAN(7 Kb)

Astrid PIERON(79 Kb)

Michael RICHTER(18 Kb)

Monique VAN HERKSEN(87 Kb)

Dirk VAN STAPPEN(27 Kb)

Isabel VERLINDEN(76 Kb)

Sabine WAHL(14 Kb)

On 23 April 2004, the Commission adopted Communication 2004/297 on the work of the JTPF in business taxation (October 2002 - December 2003) and on a code of conduct for the effective implementation of the Arbitration Convention . On 7 December 2004 the Council adopted the proposed code of conduct.

The Code of Conduct applies in cases where an EU Member State's tax administration increases the taxable profits of a company from its cross-border intra-group transactions, for example by making a transfer pricing adjustment.

It ensures a more effective and uniform application by all Member States of the 1990 (Arbitration Convention 90/436/EEC) by establishing common procedures concerning:

• the starting point of the 3 year period which is the deadline for a company suffering double taxation to present its case to the relevant Member State's tax administration
• the starting point of the 2 year period during which Member States' tax administrations must attempt to reach an agreement that eliminates the double taxation that is the subject of the complaint
• the arrangements to be followed during this mutual agreement procedure (the practical operation of the procedure, transparency and taxpayer participation)
• the practical arrangements for the 2nd phase of the dispute resolution procedure provided for in the AC that must follow if there is no mutual agreement between the tax authorities within 2 years (i.e. the establishment and functioning of the advisory commission that must then arbitrate in the case).

The Code contains a recommendation to EU Member States to suspend tax collection during cross-border dispute resolution procedures. It also recommends that Member States should extend those rules to double tax conventions between EU Member States.

Revised code of conduct

On 14 September 2009, the Commission adopted Communication 2009/472 on the work of the JTPF from March 2007 to March 2009 and a related proposal for a revised code of conduct for the effective implementation of the Arbitration Convention. On 22 December 2009, the Council adopted the proposal.

The revised Code of Conduct is the result of a monitoring exercise carried out by the JTPF to improve the functioning of the AC by providing common interpretations on the following topics:

• serious penalties
• scope of the AC (triangular transfer pricing and thin capitalisation cases)
• interest charged/credited by tax administrations when a case is dealt with under the AC
• functioning of the AC (as regards rules about the deadline for the setting-up of the Advisory Commission and criteria for establishing the independence of arbitrators)
• the date from which a case is admissible under the AC and the inter-action of the AC and domestic litigation.

Key documents:

• Communication 2004/297 on the work of the EU Joint Transfer Pricing Forum in the field of business taxation (October 2002 - December 2003) and on a proposal for a code of conduct for the effective implementation of the Arbitration Convention
• Code of conduct for the effective implementation of the Arbitration Convention (OJ C176)(2006)
• Communication 2009/472 on the work of the JTPF from March 2007 to March 2009 and a related proposal for a revised code of conduct for implementation of the Arbitration Convention(83 Kb)  
• Final report of the JTPF on interpretation of some provisions of the AC (400 Kb)
• JTPF - Summary report on penalties(45 Kb).
• Revised Code of Conduct for the effective implementation of the Arbitration Convention (Official Journal C322 of 30/12/2009)
• Arbitration Convention 90/436/EEC (and dedicated web page)

On 27th June 2006, the Council adopted a Code of Conduct on transfer pricing documentation for associated enterprises in the European Union (EUTPD). This was part of a Communication of the European Commission adopted on 10 November 2005.

The Code of Conduct aims to standardise the documentation that multinationals must provide to tax authorities on their pricing of cross-border intra-group transactions ('transfer pricing' documentation).

The Code, that was developed on the basis of work in the JTPF (IP/02/1105  ). It aims to reduce significantly the tax complications that companies face when trading with associated enterprises in other Member States. Companies frequently complain about the onerous and divergent documentation obligations with which they have to comply in such cases in the different Member States involved.

The Code is a political commitment. It will not affect Member States' rights and obligations or the respective spheres of competence of the Member States and the EU.

Key documents:

• Communication 2005/543 on the work of the JTPF on transfer pricing documentation for associated enterprises in the EU,
• Report on the activities of the JTPF in the field of documentation requirements SEC(2005) 1477(284 Kb)  
• Press releases IP/06/850   and IP/05/1403  , on a code of conduct for transfer pricing
• Code of conduct on transfer pricing documentation in the EU – FAQ( MEMO/05/414(62 Kb)  ),
• Resolution on a code of conduct on transfer pricing documentation for associated enterprises in the EU, OJ C176(EUTPD).

The Commission on 26th February 2007 adopted a Communication on the work of the Joint Transfer Pricing Forum (hereafter: JTPF) in the field of dispute avoidance and resolution procedures including guidelines for Advance Pricing Agreements (APAs) within the EU.

The Communication is the third outcome achieved since the JTPF was set up in October 2002, and the proposed guidelines are based on the best practices identified by the JTPF in its report.

The Guidelines aim to prevent transfer pricing disputes and associated double taxation from arising in the first place by laying down how an efficient APA process should work.

An APA will provide in advance certainty concerning the transfer pricing methodology and therefore simplify or prevent costly and time-consuming tax examinations into the transactions included in the APA. This should lead to savings for all parties involved, cut compliance costs and provide more consistency in transfer pricing within the EU. This approach will reduce tax obstacles to cross-border economic activities in the internal market.

The Guidelines set out the framework for the overall procedure and provide details of how some specific problems could be resolved. They also provide examples of the necessary time frame and the types of areas which would need to be covered by the APA.

On 5 June 2007 the Council "welcomed the Commission Communication on the work of the Joint Transfer Pricing Forum in the field of dispute avoidance and resolution procedures including guidelines for Advance Pricing Agreements within the EU. The Council noted the commitment of Member States to follow the Guidelines and to implement them in their national administrative practices as far as legally possible".

Key documents:

• Communication 2007/71 on the work of the JTPF in the field of dispute avoidance and resolution procedures including guidelines for APAs in the EU(172 Kb)   .
• Report on the work of the JTPF in the field of dispute avoidance and resolution procedures and on guidelines for APAs in the EU – COM(2007)71(258 Kb)  .

On 25 January 2011 the Commission adopted Communication 2011/16 on the work of the JTPF from April 2009 to June 2010 including proposed guidelines on low-value-adding intra-group services(124 Kb)  .

The guidelines:

• provide a response to an increasing awareness that business and tax administrations' compliance resources (for auditing and dispute resolution) are taken up by what used to be a routine aspect of intra-group transactions.
• put into context the nature of certain transactions (related to intra-group service provision) and propose appropriate (but less resource-intensive) approaches to evaluate these transactions against the internationally recognised arm's-length standard.
• are based on certain principles: deductibility of all relevant costs subject to domestic law provisions; availability of relevant and reliable information; flexibility of the reviewer's approach.
• address more specific areas such as shareholder costs, cost pools, allocation keys, etc.

Communication 2011/16 (124 Kb)  also proposed potential approaches to non-EU triangular cases.

The Forum defined non-EU triangular cases as cases where 2 states in a Mutual Agreement Procedure cannot fully resolve any double taxation arising in a transfer pricing case when applying the arm's length principle, because an associated enterprise situated in a third state is identified as being the source of non-arm's-length results in a chain of relevant transactions or commercial/financial relations. Different approaches to resolving such disputes were suggested.

In addressing the issue of transfer pricing triangular cases, the Forum distinguished between cases where the third associated company is situated within or outside the EU. Cases where all associated enterprises are within the EU are covered by the provisions of the revised Code of Conduct on the Arbitration Convention (see above).

On 19 September 2012 the Commission adopted a Communication (COM/2012/516  ) on the work of the EU Joint Transfer Pricing Forum in the period July 2010 to June 2012 including the Report on Small and Medium Enterprises and Transfer Pricing prepared by the JTPF.

The report examines the specific issues of SMEs in the field of transfer pricing and suggests how to address them in the form of a series of recommendations concerning areas such as access to information, training, documentation requirements, audit, existing best practices and dispute resolution.

On 19 September 2012 the Commission adopted a Communication (COM/2012/516  ) on the work of the EU Joint Transfer Pricing Forum in the period July 2010 to June 2012 including the report on Cost Contribution Arrangements on services not creating Intangible Property (IP).

The report elaborates on the different concepts underlying Cost Contribution Arrangements (CCAs) on services and Intra Group Services (IGS). It describes the general features for determining whether the arm's length principle has been applied to CCAs on services not creating IP. The report provides a list of information items that should meet the requirements of most reviewers when determining whether a CCA can be regarded as arm's length and gives concrete recommendations to achieve a uniform treatment within the EU.