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EU Extends Mandate of Transfer Pricing Forum

by Ulrika Lomas, Tax-News.com, Brussels

31 January 2011


The European Commission has decided to extend the mandate of the European Union (EU) Joint Transfer Pricing Forum (JTPF) until March 2015, and has also adopted a communication setting out guidelines on two technical issues related to transfer pricing taxation.

The mandate was extended so that the JTPF “can continue its important work in resolving double taxation problems for businesses across Europe.” The JTPF, which was formally established in June 2002 and is made up of national tax administrations and business representatives, helps to solve problems linked to the taxation of cross-border transactions between same-group and associated companies within the EU.

In particular, there presently is a complex system for deciding how to tax such transactions, and differences between member states' transfer pricing rules can result in double taxation and heavy administrative burdens for businesses. It is hoped that the planned proposal for a common consolidated corporate tax base (CCCTB), which Algirdas Šemeta, the EU Commissioner for Taxation and Customs Union, Audit and Anti-Fraud, intends to bring forward this year, will help provide a permanent solution to many of the problems that businesses face in this respect.

However, it was said that, in the meantime, the work of the JTPF is crucial in providing businesses with greater certainty and consistency when it comes to the taxation of their cross-border operations.

In respect of its work in the period between April 2009 and June 2010, the JTPF states that its discussions were concluded on two subjects. The EC has accepted both conclusions, which will now be put before the European Council for their endorsement.

One conclusion is associated with the application of the arm’s length principle to value-adding intra-group services, and the other deals with double tax dispute resolutions when a non-EU associate enterprise is involved in a transaction (non-EU triangular cases).

Reports were produced on each of these subjects, and monitoring exercises to gauge the level of implementation of previous JTPF initiatives were also completed. Discussions commenced in the period, but not yet concluded, cover matters related to small and medium enterprises and a particular intra-group arrangement known as a cost contribution arrangement. The JTPF has also started to consider its future work programme.

This comprehensive report in our Intelligence Report series examines the global and national landscapes in which companies can use transfer pricing to improve their after-tax returns, including summaries of recent developments in design of the corporate supply train, the usefulness of 'offshore' in international corporate tax planning, and a section covering the spread of DTAAs and CFC laws. It is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report16.asp
TAGS: compliance | tax | business | European Commission | tax compliance | corporation tax | group taxation | multinationals | transfer pricing | triangulation | European Union (EU) | Europe

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