4. Changes in Transfer Pricing Approches - Monica Todose

Changes in transfer pricing approaches – documents
12 February 2013 - OECD issues BEPS Action Plan
“Addresing Base Erosion and Profit Shifting”
Action 13, Actions 8-10, Action 14
18 March 2015 - European Commission issues a
Communication on tax transparency to fight tax evasion
and avoidance
Establishing strict transparency for tax rulings
Promoting greater tax transparency internationally
17 June 2015 – European Commission new
communication: A Fair and Efficient Corporate Tax
System in the European Union: 5 Key Areas for Action
Improving the Transfer Pricing framework in the EU
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Changes in transfer pricing approaches – documents
2.2 Improving the Transfer Pricing framework in the EU
“Therefore, the Commission will begin work with Member States
and businesses to build on these rules and develop coordinated and
more concrete implementation within the EU, reflecting the
economic reality of the Single Market. For example, recent OECD
and EU proposals aiming at increasing transparency will provide
new information which could help tax administrations identify
intragroup transactions which require further investigation. The
Commission could provide guidance and propose specific tools on
how this information could be best used by tax administrations.”
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Recent International Developments in Transfer Pricing
Main characteristics
Increasing importance of transfer pricing;
New Transfer Pricing Guidelines in 2017, new updates on the way;
Permanent establishments on the spotlight, including in a digital
context;
Increased attention to double taxation issues (arbitration on the
spotlight including for tax treaties MAP cases, if agreed between
countries);
Increased transparency, exchange of information;
Increased cooperation among tax administrations;
New legal transfer pricing legislation in most of the countries, new EU
directives;
EU state aid investigations in case of some tax rulings;
In short
Increased burden of compliance for both tax administrations and
taxpayers.
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Romania
Non - OECD country following OECD’s Transfer Pricing Guidelines
for Multinational Enterprises and Tax Administration, as amended
OECD associated member state for BEPS Action plan since 2017
EU Member State
Relevant TP provisions:
• application of the arm’s length principle
• affiliation rules
• transfer pricing documentation
• Advance Pricing Agreement
TP in the OECD and EU context
• Mutual Agreement Procedure
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TP risk management
TP risks, in case of a reactive approach
Risk of large tax adjustments
Potential for double taxation
Significant penalties and interest
Tax audit risks (resources needed for disputes)
Benefits, in case of a proactive approach
No or minimal disruption to the business from a tax audit
No or minimal adjustments
No penalties
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Slide 7

Period and
no. of APAs
applications
2007 -
2009
2009 -
2014
2015 2016 2017 Total no.
of applic.
APAs
Total
(issued)
Unilateral 6 9 1 11 6 32 20
Bilateral 0 3 0 10 1 14 3
Multilateral 0 0 0 0 0 0 0
Total 6 12 1 21 7 46 23
Applications
rejected
1 0 2 0 0 3
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Romania - emerging market in East Europe
10 years of APA program but increased number of APA
applications during the last 3 years;
increased interest for bilateral APAs (Greece,
Luxembourg, Germany, Switzerland, Sweden);
all unilateral APAs extended and, in some cases, turned
into bilateral;
two sided development: at the level of the tax
administration and increased taxpayer’s awareness;
increased interest for MAPs during the last year;
currently under OECD peer review under Action 14
Slide 9

Thank you !
Slide 10