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

On the proposal for a Council directive on transfer pricing

A-9-2024-0066

Committee on Economic and Monetary Affairs · Rapporteur: Kira Marie PeterHansen

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Written by a language model from the full text only; every figure comes from the text. The paragraph links open the paragraph a statement rests on — check the text itself before relying on it.

Parliament's amended version of the Commission proposal for a Council directive on transfer pricing harmonises Member States' transfer pricing rules and the application of the arm's length principle. It adds rules on corresponding and downward adjustments, a fast-track procedure, documentation templates and delegated acts for the Commission. It re-establishes an EU Joint Transfer Pricing Forum, extends the ETACA initiative and lets Parliament observe international transfer pricing negotiations. It shortens the deadlines for Member States to transpose and apply the directive and brings the Commission's evaluation forward.

Committee position. The committee approves the Commission proposal as amended. It simplifies the directive, aligns it with the latest OECD Transfer Pricing Guidelines, strengthens the Commission's role and Parliament's observer role, and shortens the entry into force.

Key points

  1. The directive harmonises Member States' transfer pricing rules and ensures a common application of the arm's length principle in the Union, simplifying compliance while enforcing tax rules.
  2. The arm's length principle is defined by reference to Article 9 of the OECD Model Tax Convention, and the OECD Transfer Pricing Guidelines are those of 2022 as amended.
  3. Member States should make corresponding adjustments, including through a fast-track procedure concluded in 180 days, joint audits or multilateral risk assessment programmes, using the procedures of the Directive on Administrative Cooperation.
  4. Member States should not grant corresponding adjustments in specified cases, and may make downward adjustments only under conditions that avoid double non-taxation.
  5. A taxpayer's results within the interquartile range should not be adjusted unless a different positioning is justified; results outside the range are adjusted to the median.
  6. A common approach to transfer pricing documentation is introduced, with one standard template, rules on content, language and timeframes, and the Commission is empowered to adopt delegated acts on documentation.
  7. The Commission is empowered to adopt delegated acts on applying the arm's length principle to specific transactions, on safe harbours and on integrating the BEFIT simplified approach.
  8. A European Forum on Transfer Pricing is established, chaired by the Commission, with Member State representatives, taxpayers, academics, civil society and Parliament as an observer.
  9. The scope of the European Trust and Cooperation Approach is extended to transfer pricing reviews of specific intra-Union flows, and Member States are invited to link it to advance pricing arrangements.
  10. The Commission shall evaluate the directive every three years, with the first report by 31 December 2029, and shall review its application for MNE groups under the BEFIT proposal.
  11. Information communicated by Member States may be transmitted to other Member States and the European Parliament, and personal data shall be retained no longer than 10 years.
  12. Member States shall adopt and publish the necessary provisions by 31 December 2024 and apply them from 1 January 2025.

Who is affected

  • Member States, which must apply the arm's length principle, grant corresponding adjustments and transpose the rules by the new deadlines.
  • Taxpayers, especially small and medium-sized enterprises operating cross-border, who gain tax certainty and lower compliance costs.
  • Multinational enterprise groups, including those in scope of the BEFIT proposal, for which the directive is to be reviewed.
  • Tax administrations, which must deal with documentation, adjustments and dispute resolution within set timeframes.

Figures and deadlines

  • USD 100 to 240 billion annually: OECD estimate of global corporate income tax revenue losses due to BEPS practices.
  • 180 days: time to conclude a fast-track procedure for corresponding adjustments.
  • 40 days: time for Member States to declare a request admissible or notify missing information.
  • 40 days: time granted to the taxpayer to provide missing information.
  • 200 days: time to conclude the procedure for double taxation from a primary adjustment, extendable once by 100 days.
  • 10 years: maximum retention period for personal data processed under the directive.
  • 31 December 2029: deadline for the Commission's first evaluation report.
  • 31 December 2024 and 1 January 2025: deadlines for Member States to adopt and apply the transposing provisions.

Legal basis: Article 115 of the Treaty on the Functioning of the European Union.