Transfer pricing chnages

The European Commission (EC) has adopted a Communication on the work of the EU Joint Transfer Pricing Forum (JTPF) which includes guidelines on risk management in dealing with transfer pricing; the application of secondary adjustments; and the use of compensating adjustments report Harris & Co accountants Northampton

The guidelines on managing transfer pricing risk are based on the general principles of cooperation between taxpayer and tax administration(s), identification of high and low risk areas as well as well-targeted, timely and appropriate actions. Best practices are identified for the pre-audit, audit and dispute resolution phases of examining a transfer pricing file.

On secondary adjustments, the JTPF recommends that where such adjustments are not compulsory, they should not be imposed in order to avoid double taxation. Where secondary adjustments are compulsory, means to relieve double taxation should be provided.

The JTPF has also provided practical guidance on avoiding double taxation and double non-taxation in the application of compensating adjustments in spite of the different practices of Member States. In particular, it recommends that member states should accept a compensating adjustment initiated by the taxpayer for the purpose of filing the tax return, if the taxpayer has fulfilled a set of conditions.

The EC says the guidelines are very relevant in the context of the ongoing OECD work on the Base Erosion and Profit Shifting project (BEPS). The Communication also provides an update on the implementation of the EU JTPF work programme, which runs until March 2015.

The Communication is available here.