2.2.Improving the Transfer Pricing framework in the EU
Transfer pricing rules are aimed at ensuring that the price of intra-group transactions matches a comparable market price and that profits are fairly divided between jurisdictions in which a multinational enterprise operates. However, it is clear that the current transfer pricing system no longer works effectively in the modern economy. Both businesses and tax administrations find the current system complex. Furthermore, the system can be manipulated by businesses to shift profits to low or no tax jurisdictions.
The OECD BEPS project is bringing forward guidelines intended to bring the Transfer Pricing outcomes in line with value creation. These guidelines will be fairly broad, however, to reflect the needs of the wider OECD/G20 membership.
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.
