Ingela Willfors, Director of the Tax and Customs Department at the Swedish Ministry of Finance, explained why Member States are not convinced by the Transfer Pricing Directive, during a public debate organised by the European Economic and Social Committee (EESC) on Thursday 25 January.
Presented in September in conjunction with the Business in Europe: Framework for Income Taxation (BEFIT) initiative (see EUROPE 13248/20), the main aim of this directive is to enhance tax predictability. The aim is to reduce double taxation and double non-taxation on cross-border transactions.
“There are more than 2,000 pending map cases between Member States and we think this is an issue that we need to address”, said Mauro Faggion, Seconded National Expert, Corporate Tax Transparency and Transfer Pricing, at the European Commission’s Directorate-General for Taxation and Customs Union (DG TAXUD).
He recalled the text’s two-stage approach: implementing the arm’s length principle in EU legislation, then ensuring consistency with and clarifying the OECD guidelines.
According to him, the EU Council has already started its work. “The Belgian Presidency seems to be interested in pursuing this discussion, and we envisage it coming into force on 1 January 2026”, said Mr Faggion.
However, Ms Willfors was “quite sceptical”. In her view, the interpretation of the OECD guidelines is not the main problem facing Member States. “Most of the disputes we see concern facts and circumstances, not the interpretation of terms”, she reported.
“Complaints are more about administrative issues and how long the procedures take to get this tech certainty we want”, she added.
She noted that most Member States have concluded bilateral tax treaties to avoid double taxation, and that procedures exist for settling disputes between the two countries. Under these treaties, companies can therefore submit cases of double taxation to these dispute resolution procedures. And if states are unable to resolve disputes, they can resort to arbitration.
Ms Willfors also pointed to the problems that could arise if the Court of Justice of the EU interprets the transfer pricing guidelines to rule on cases concerning the directive. “This could create precedents that would limit the use of the guidelines”, she said.
Finally, she pointed out a loophole in the text: there is no mention of the third countries where the companies would have carried out transactions. (Original version in French by Anne Damiani)