Brussels, 04/06/2014 (Agence Europe) - On Wednesday 4 June, the European Commission published a report giving transfer price guidelines. Transfer prices set the criteria for transactions within a multinational company by setting the rate for inter-group transactions from one country to another.
The report includes guidelines on three aspects of the treatment of transfer pricing transactions: risk management in dealing with transfer pricing, the application of secondary adjustments and the use of compensating adjustments. The Commission says that countries and companies vary in their approach to the arm's length principle for such transfers, which can lead to increased cost and red tape and double or non-taxation.
The Commission has published guidelines for the member states on how to avoid double taxation and solve conflicts that arise in this connection. Where compensating adjustments are not compulsory, it is recommended that they remain so in order to avoid double taxation. Likewise, where they are compulsory, measures should be introduced to avoid or reduce double taxation.
It is recommended that member states agree to compensating adjustments suggested by the taxpaying company as long as a number of criteria are met, such as that the profits of the companies in question are calculated in a similar manner in different countries. (EL)