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Transfer pricing code
The European Commission has adopted a proposal for a code of conduct that would standardise the documentation that multinationals must provide to tax authorities on their pricing of cross-border intra-group transactions. The proposal, which has been developed on the basis of work in the EU joint transfer pricing forum, would reduce the tax complications that companies face when trading with associated enterprises in other Member States.
Transfer pricing code
The European Commission has adopted a proposal for a code of conduct that would standardise the documentation that multinationals must provide to tax authorities on their pricing of cross-border intra-group transactions. The proposal, which has been developed on the basis of work in the EU joint transfer pricing forum, would reduce the tax complications that companies face when trading with associated enterprises in other Member States.
The documentation that multinational enterprises would have to file with tax administrations in order to report on their pricing for cross-border intra-group activities would consist of two main parts:
- One set of documentation should provide a blue print of the company and its transfer pricing system that would be relevant and available to all EU Member States concerned. It would provide information such as a general description of the business and business strategy, of the transactions involving associated enterprises in the EU and of the enterprise's transfer pricing policy.
- A set of standardised documentation for each of the specific Member States concerned with the intra-group transactions. This documentation would include information such as amounts of transaction flows within that country, contractual terms and the particular transfer pricing methods used and would only be available to the relevant country.
The EU transfer pricing documentation should improve both the quality of the information provided by businesses and taxpayers' compliance with transfer pricing documentation requirements within the EU. It should thus reduce the risk for businesses of double taxation and exposure to documentation related penalties. At the same time it should lead to increased transparency regarding the group's transfer prices and thus facilitate the work of tax administrations.
The transfer pricing documentation would be optional for businesses. It would cover all group entities resident in the EU, including transactions between group entities resident in the EU and associated enterprises outside the EU.
European Commission press release IP/05/1403 dated 10 November 2005
