On 23 April 2004, the Commission adopted a Communication (COM(2004) 297 final of 23 April 2004) to the Council, the European Parliament and the European Economic and Social Committee on the work of the EU Joint Transfer Pricing Forum in the field of business taxation from October 2002 to December 2003 and on a proposal for a Code of Conduct for the effective implementation of the EU Arbitration Convention (90/436/EEC of 23 July 1990). The proposed Code of Conduct was adopted by the Council on 7 December 2004.
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 EU Member States of the 1990 Arbitration Convention (90/436/EEC) by establishing common procedures concerning:
- the starting point of the three-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 two-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); and
- the practical arrangements for the second phase of the dispute resolution procedure provided for in the EU Arbitration Convention that must follow if there is no mutual agreement between the tax authorities within two 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 the tax collection during cross-border dispute resolution procedures. It is also recommended that Member States should extend those rules to double tax conventions between EU Member States.
On 14 September 2009, the Commission adopted a Communication on the work of the EU Joint Transfer Pricing Forum in the period March 2007 to March 2009 including a proposal for a revised Code of Conduct. The proposal was adopted by the EU Council on 22nd December 2009.
The revised Code of Conduct is the result of a monitoring exercise achieved by the JTPF aiming to improve the smooth functioning of the Arbitration Convention (AC) by providing common interpretation on the following topics:
- serious penalties;
- scope of the AC (triangular transfer pricing and thin capitalization 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.
For further information see the following key documents:
- Commission Communication (COM/2004/297 of 23/04/2004) on the work of the EU Joint Transfer Pricing Forum in the field of business taxation from October 2002 to December 2003 and on a proposal for a Code of Conduct for the effective implementation of the Arbitration Convention (90/436/EEC of 23 July 1990)
- Code of Conduct for the effective implementation of the "Arbitration Convention" (see Official Journal C176 of 28/07/2006, p.8)
- Commission Communication (COM/2009/472
of 14/09/2009) on the work of the EU Joint Transfer Pricing Forum in the period March 2007 to March 2009 and a related proposal for a revised Code of Conduct for the effective implementation of the Arbitration Convention (90/436/EEC of 23 July 1990); working papers on the Forum's work: Final report and Summary report on penalties.
- Revised Code of Conduct for the effective implementation of the "Arbitration Convention" (see Official Journal C322 of 30/12/2009)
- Arbitration Convention (see dedicated web page)
The Council on 27th June 2006 adopted a Code of Conduct on transfer pricing documentation for associated enterprises in the European Union (EUTPD) which was part of a Communication of the European Commission adopted on 10 November 2005. This 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 has been developed on the basis of work in the EU Joint Transfer Pricing Forum (see IP/02/1105), 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 and will not affect Member States' rights and obligations or the respective spheres of competence of the Member States and the EU.
For further information see the following key documents:
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 (hereafter APAs) within the EU.
This Communication is the third outcome achieved since the establishment of the JTPF 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 in an APA, lead to a reduction of 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 over-all procedure and also 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 5th June 2007 the Council in its conclusions "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".
For further information see the following key documents:
- Commission Communication (COM(2007)71 of 26/02/2007) 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.
- Report on the Activities of the EU Joint Transfer Pricing Forum in the Field of dispute avoidance and resolution procedures.
