EU Transfer Pricing Proposal
On 12 September 2023, the European Commission published a Proposal for a Council Directive on transfer pricing. The proposal is intended to harmonise transfer pricing rules within the EU and ensure a common approach to transfer pricing issues. It is part of the package known as Business in Europe: Framework for Income Taxation (BEFIT), read more about BEFIT here.
The transfer pricing proposal incorporates the arm's length principle and key transfer pricing rules into EU law, clarifies the role and status of the OECD Transfer Pricing Guidelines and creates the possibility to establish common binding rules on specific aspects of the rules within the EU.
If adopted by the European Council, it is intended the rules will apply from 1 January 2026.
What does the proposal aim to address?
While all Member States have domestic transfer pricing legislation in place, transfer pricing rules are not currently harmonised through legislative acts at EU level. The proposal is intended to increase tax certainty; mitigate the risk of litigation and double taxation and reduce any opportunities for companies to use transfer pricing for aggressive tax planning purposes.
Who does this proposal apply to?
If implemented, the proposal would apply to taxpayers that are registered in, or subject to, tax in one or more Member States, including permanent establishments in one or more Member States.
The Commission published a public consultation on the proposal for a Directive on 23 September 2023. The Institute responded to the consultation in December 2023.
European Commission Documents and Links
September 2023 – European Commission transfer pricing webpage
September 2023 – Proposal for a Council Directive on transfer pricing
September 2023 – Press release – Taxation: new proposals to simplify tax rules and reduce compliance costs for cross-border businesses
September 2023 – Questions and Answers on BEFIT and transfer pricing