EU Council Adopts Code Of Conduct On Transfer Pricing Double Taxation

by Ulrika Lomas, for LawAndTax-News.com, Brussels

09 December 2004

The European Commission announced on Tuesday that it welcomed the EU Council's adoption of a Code of Conduct to eliminate the double taxation that can arise where an EU Member State, by making a transfer pricing adjustment, increases the taxable profits of a company from its cross-border intra-group transactions.

The Code is designed to ensure a more effective and uniform application by EU Member States of the 1990 Arbitration Convention (90/436/EEC), which is designed to deal with double taxation which arises where, for example, one EU Member State increases the taxable profits of a company from its cross-border intra-group transactions and the other Member State of the associated enterprise does not make a corresponding downward adjustment to the taxable profits of that enterprise.

It establishes rules such as the starting points of time limits for dealing with complaints and practical arrangements concerning the mutual agreement and arbitration phases of the Convention, and should lead to dispute resolution within a maximum of three years

Taxation Commissioner László Kovács announced this week that:

"I am very pleased that Member States have adopted this Code of Conduct that will improve transfer pricing dispute settlement arrangements so as to ensure the elimination of double taxation of company profits." He added:

"The agreement demonstrates the effectiveness of the EU Joint Transfer Pricing Forum and the Commission has therefore decided that the Forum should continue until the end of 2006".

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