3. ACTIVITIES OF THE EU JOINT TRANSFER PRICING FORUM FROM JANUARY 2004 TO MAY 2005
8. A report on the activities of the JTPF, adopted by consensus in May 2005 and covering the work on transfer pricing documentation requirements is included in a Staff Working Document[5]. The activity report summarises the deliberations of the JTPF. It concludes that standardized and partially centralized transfer pricing documentation for associated enterprises in the EU could benefit the development of the single market.
9. Examination of transfer pricing documentation for associated enterprises in the EU was the main activity of the JTPF from January 2004 to May 2005. It has been noticed that documentation requirements in the EU have increased and there are significant differences in documentation requirements between Member States.
10. The existence of different sets of documentation requirements in the internal market places a burden on a company in one Member State that wants to set up and/or conduct business with an affiliated company in another Member State. The preparation of separate and unique documentation packages in different Member States is uneconomic. Small and medium-sized enterprises especially can be affected by these problems.
11. In order to remedy this situation, the Forum identified different approaches to documentation requirements and, in the light of their pros and cons, in particular in terms of legal certainty and flexibility, decided to pursue the concept of standardized "EU Transfer Pricing Documentation" (EU TPD). The main features of the EU TPD are standardization of the documentation requirements necessary for a tax administration as a risk assessment tool and to obtain sufficient information for the assessment of a group's transfer prices; the possibility of centralization of the core part of the documentation (the "masterfile") at group level; and the availability to all EU Member States concerned of common standardized transfer pricing information relevant for all EU affiliates of a multinational enterprise.
12. The Forum further discussed the use of database searches for comparables, the issue of risk assessment and proposals for more general recommendations related to the timing and preparation of documentation, aggregation of transactions, simplification of documentation requirements for SMEs, language requirements, documentation-related penalties, the application of documentation rules to permanent establishments and the effect of the re-entry into force of the Arbitration Convention on 1 November 2004.
