What changed

PR_CNS_LegAct_am

P9_TA(2024)0219

Symbols for procedures

Transfer pricing

* Consultation procedure

Committee on Economic and Monetary Affairs

*** Consent procedure

PE756.000

***I Ordinary legislative procedure (first reading)

European Parliament legislative resolution of 10 April 2024 on the proposal for a Council directive on transfer pricing (COM(2023)0529 – C9-0339/2023 – 2023/0322(CNS))

***II Ordinary legislative procedure (second reading)

***III Ordinary legislative procedure (third reading)

(The type of procedure depends on the legal basis proposed by the draft act.)

Amendments to a draft act

Amendments by Parliament set out in two columns

Deletions are indicated in bold italics in the left-hand column. Replacements are indicated in bold italics in both columns. New text is indicated in bold italics in the right-hand column.

The first and second lines of the header of each amendment identify the relevant part of the draft act under consideration. If an amendment pertains to an existing act that the draft act is seeking to amend, the amendment heading includes a third line identifying the existing act and a fourth line identifying the provision in that act that Parliament wishes to amend.

Amendments by Parliament in the form of a consolidated text

New text is highlighted in bold italics. Deletions are indicated using either the ▌symbol or strikeout. Replacements are indicated by highlighting the new text in bold italics and by deleting or striking out the text that has been replaced.

By way of exception, purely technical changes made by the drafting departments in preparing the final text are not highlighted.

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

on the proposal for a Council directive on transfer pricing

(COM(2023)0529 – C90339/2023 – 2023/0322(CNS))

(Special legislative procedure – consultation)

(7) There may be legitimate reasons as to why a corresponding adjustment is not given or is less than the primary adjustment. In particular, Member States should not grant corresponding adjustments if: (i) the primary adjustment is not considered to be consistent with the arm’s length principle; (ii) the primary adjustment does not result in the taxation of an amount of profits in another jurisdiction on which the associated enterprise in the relevant Member State has already been subject to tax; and (iii) when a third country jurisdiction is involved, there is no tax treaty in place. In the absence of a primary adjustment, Member States may perform a downward adjustment only if: (i) the downward adjustment is consistent with the arm’s length principle: (ii) an amount equal to the downward adjustment is included in the profit of the associated enterprise in the other jurisdiction and therein subject to tax: and (iii) a communication on the intention to perform a downward adjustment has been sent to the relevant jurisdiction. The aim of the previous provisions is to ensure that: (i) Member States can preserve the right to assess whether the primary adjustment is at arm’s length; and (ii) there is neither double taxation nor double non-taxation. Member States should not create situations of double non-taxation.

(7) There may be legitimate reasons as to why a corresponding adjustment is not given or is less than the primary adjustment. In particular, Member States should not grant corresponding adjustments if: (i) the primary adjustment is not considered to be consistent with the arm’s length principle; (ii) the primary adjustment does not result in the taxation of an amount of profits in another jurisdiction on which the associated enterprise in the relevant Member State has already been subject to tax; and (iii) when a third country jurisdiction is involved, there is no tax treaty in place. In the absence of a primary adjustment, Member States may perform a downward adjustment only if: (i) the downward adjustment is consistent with the arm’s length principle and not leading to double non-taxation:non-taxation; (ii) an amount equal to the downward adjustment is included in the profit of the associated enterprise in the other jurisdiction and therein subject to tax:tax; and (iii) a communication on the intention to perform a downward adjustment has been sent to the relevant jurisdiction. The aim of the previous provisions is to ensure that: (i) Member States can preserve the right to assess whether the primary adjustment is at arm’s length; and (ii) there is neither double taxation nor double non-taxation. Member States should not create situations of double non-taxation.

Amendment 11

(18) ‘OECD Transfer Pricing Guidelines’ means the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022, endorsed by the OECD Council pursuant to the OECD Council Recommendation of the Council on the Determination of Transfer Pricing between Associated Enterprises [C(95)126/Final], and as amended in January 20, 2022 and included in Annex I, and any further amendments to these OECD Transfer Pricing Guidelines that the Union approved in the context of the OECD Committee on Fiscal Affairs via the adoption of a Union position under 218(9) TFEU;

(18) ‘OECD Transfer Pricing Guidelines’ means the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022, endorsed by the OECD Council pursuant to the OECD Council Recommendation of the Council on the Determination of Transfer Pricing between Associated Enterprises [C(95)126/Final], and as amended in January20 20,January 2022 and included in Annex I, and any further amendments to these OECD Transfer Pricing Guidelines that the Member States approved in the context of the OECD Committee on Fiscal Affairs or the Union approved via the adoption of a Union position under Article 218 TFEU;

Amendment 23

(c) Member States shall ensure that when the double taxation arises from a primary adjustment made in another Member State, the procedure is concluded within 180 days from the receipt of the taxpayer’s request with a reasoned act of acceptance or rejection.

(c) Member States shall ensure that when the double taxation arises from a primary adjustment made in another Member State, the procedure is concluded within 200 days from the receipt of the taxpayer’s request with a reasoned act of acceptance or rejection. The procedure can be extended once by a period of 100 days if the tax payertaxpayer and the Member States concerned all agree to such extension.

Amendment 29

1. The Commission shall establish and chair the European Forum on Transfer Pricing (EFTP). The EFTP shall provide advice and assistance to the committee within the meaning of Article 17, notably to assess the need for any adjustment to this Directive with the objective of guaranteeing the continuous uniformity of transfer pricing methodologies within the Union and on the global stage, most importantly taking into account developments at OECD or UN level.

2. The EFTP shall be composed of representatives of Members States and a balanced representation of tax payers,taxpayers, academics and civil society. The European Parliament shall be a member of the EFTP as an observer. The conditions for membership shall be decided by the committee as referred to in Article 17.

Amendment 38

1. The power to adopt the delegated act referred to in Article 13 shall be conferred on the Commission subject to the conditions laid down in this Article.

1. The power to adopt the delegated acts referred to in Article 3, second subparagraph,paragraph, Article 13 and Article 14(2), (2a) and (2b) shall be conferred on the Commission subject to the conditions laid down in this Article.

Amendment 44

2. The delegation of power referred to in Article 13 may be revoked at any time by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of the delegated act if already in force.

2. The delegation of power referred to in Article 3, second subparagraph,paragraph, Article 13 and Article 14(2), (2a) and (2b) may be revoked at any time by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of the delegated act if already in force.

Amendment 45

Member States shall adopt and publish, by [31 December 2025] at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

Member States shall adopt and publish, by [3131 December 2024]2024 at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

Amendment 50

They shall apply those provisions from [1 January 2026].

They shall apply those provisions from [11 January 2025].2025.

EXPLANATORY STATEMENT

The rapporteur recognises the problems put forward by the European Commission and fully subscribes to the objectives of the directive. The rapporteur does regret that the European Commission has not properly consulted stakeholders on this specific proposal.

Taking into account the above, the rapporteur has opted in its report to simplify the directive and align as closely as possible to the latest OECD Transfer Pricing Guidelines, both to provide certainty to tax payers and Member States. The rapporteur believes the European Commission made in certain areas choices which have been insufficiently justified. However, the rapporteur supports a stronger future role for the European Commission in seeking a more harmonised approach in the EU on applying the OECD Transfer Pricing Guidelines, in the same vein the rapporteur supports the coordination amongst Member States ahead of OECD negotiations on the future guidelines and towards third countries.

The proposed simplification has led to the rapporteur’s suggestion to shorten the entry into force of the directive, as most Member States already introduced the arm’s length principle in domestic legislation.

The rapporteur also wishes to emphasise the risks with the current transfer pricing status quo in the EU of double non-taxation, illegal state aid, aggressive tax planning and significant losses of tax revenues. The rapporteur feels these issues have been too little recognized in the proposed directive.

The objectives enshrined in articles 6 and 7, reducing tax disputes and avoiding double non taxation through unilateral downward adjustments, are supported by the rapporteur.

The rapporteur defends a stronger role for the European Parliament. The European Parliament could act as an observer in the future Transfer Pricing negotiations at EU and OECD level.

Finally, and most importantly, the rapporteur recognizes the significant limitations of the arm’s length principle and the OECD Transfer Pricing Guidelines. The rapporteur supports the idea of phasing out the application of the arm’s length principle and instead introduce group-wide consolidation and formulary apportionment as a means of fairly allocating profits in-between countries and recognizing the operational reality of a multinational company. The rapporteur welcomes the important developments in this direction through the OECD Pillar 1 proposal, also known as the Multilateral Convention, and the European Commission’s proposed BEFIT directive. Although the rapporteur recognizes that in the meantime there is a need for a proper and consistent application of the arm’s length principle in the EU.

To this end, the rapporteur has included a sunset clause in this directive. The directive should first cease to apply for those companies in scope of the BEFIT directive, known as the BEFIT groups, as of 2035. Going further, the directive should cease to exist for all multinational groups operating in the EU as of 2040, except for their transactions with third countries.

To conclude the rapporteur proposes to align the directive with the opinion provided by the European Data Protection Board.

ANNEX: ENTITIES OR PERSONS FROM WHOM THE RAPPORTEUR HAS RECEIVED INPUT

Pursuant to Article 8 of Annex I to the Rules of Procedure, the rapporteur declares that she has received input from the following entities or persons in the preparation of the report, until the adoption thereof in committee:

Entity and/or person

PWC

Finans Danmark, Bruxelles

BEPS monitoring Group

Tax Justice Network

Permanent Representatives from France, Netherlands, Belgium and Denmark

Accountancy Europe

Representatives of DG Taxud

Prof. Joachim Englisch from University of Law Munster Germany

The list above is drawn up under the exclusive responsibility of the rapporteur.

PROCEDURE – COMMITTEE RESPONSIBLE

Title

Transfer pricing

References

COM(2023)0529 – C9-0339/2023 – 2023/0322(CNS)

Date Parliament was consulted

14.11.2023

Committee responsible

Date announced in plenary

ECON

11.12.2023

Rapporteurs

Date appointed

Kira Marie Peter-Hansen

19.9.2023

Discussed in committee

4.12.2023

14.2.2024

Date adopted

22.2.2024

Result of final vote

+:

–:

0:

28

3

2

Members present for the final vote

Anna-Michelle Asimakopoulou, Gilles Boyer, Valentino Grant, Claude Gruffat, Eero Heinäluoma, Michiel Hoogeveen, Danuta Maria Hübner, Stasys Jakeliūnas, Othmar Karas, Georgios Kyrtsos, Aurore Lalucq, Philippe Lamberts, Pedro Marques, Caroline Nagtegaal, Luděk Niedermayer, Lefteris Nikolaou-Alavanos, Piernicola Pedicini, Lídia Pereira, Sirpa Pietikäinen, Antonio Maria Rinaldi, Alfred Sant, Aušra Seibutytė, Paul Tang, Irene Tinagli

Substitutes present for the final vote

Andżelika Anna Możdżanowska, René Repasi, Eleni Stavrou

Substitutes under Rule 209(7) present for the final vote

João Albuquerque, Jordi Cañas, Deirdre Clune, Bernard Guetta, Nacho Sánchez Amor, Michal Wiezik

Date tabled

1.3.2024

FINAL VOTE BY ROLL CALL IN COMMITTEE RESPONSIBLE

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