The EU Joint Transfer Pricing Forum has published the recently agreed to report on a coordinated approach to transfer pricing controls within the EU. The report establishes best practices by issuing various recommendations for both taxpayers and tax administrations, and encourages closer cooperation in the field of transfer pricing controls within the EU, in order to avoid double taxation or non-taxation. Further, the report serves as a starting point for analyzing available tools and how they can be improved based on the current EU legal framework.

The ten specific recommendation made in the report include:

Recommendation 1: Exchange of information and cooperation between tax administrations should be used where they are expected to assist in the identification of transfer pricing risks and to contribute to an efficient audit.

Recommendation 2: It is preferable to take a cooperative approach based on dialogue and trust. A cooperative approach is inter alia characterised by communication between tax administrations and taxpayers. The taxpayer should be actively involved in the actual auditing activities and have the right to communicate and be heard in accordance with the national provisions. The taxpayer should be timely informed of the steps taken by the tax administrations during the audit. At the same time, the taxpayer should be transparent and share in a timely manner the relevant information with each of the tax administrations involved.

Recommendation 3: Member States are encouraged to implement legislation that permits the active presence of visiting foreign officials in accordance with Article 11 of Directive 2011/16/EU on administrative cooperation in the field of taxation.

Recommendation 4: Member States are encouraged to swiftly lay down the legal framework which would allow them to perform corresponding downward adjustments as a result of a common understanding of the facts and circumstances and of the application of the arm's length principle.

Recommendation 5: Member States should use, in appropriate cases, the possibilities under Directive 2011/16/EU on a real time basis for the purpose of achieving a high degree of coordination, smooth communication and exchange of information during a transfer pricing control.

Recommendation 6: Member States should ensure that stakeholders are aware of the possibilities and functioning of the available tools for taking a coordinated approach to transfer pricing controls. In order to facilitate the communication between stakeholders, tax administrations are encouraged to establish a contact point(s) and publish a functional e-mail box to contact in matters related to coordinated transfer pricing controls. To enable a cooperative approach, Member States are encouraged, to the extent possible, to be flexible as regards the choice of the audit periods, the timing and the way the audit is performed.

Recommendation 7: It is recommended that Member States participate in coordinated transfer pricing controls unless their refusal is based on a reasonable explanation (taking into account recommendation 3).

Recommendation 8: It is recommended to agree and sign an audit plan for each coordinated transfer pricing control.

Recommendation 9: It is recommended that Member States agree to a Memorandum of Understanding (MoU), in case they wish to establish sustained coordinated transfer pricing controls programme.

Recommendation 10: It is recommended that each coordinated transfer pricing control finishes with a concluding report.