“Think international – act international – audit international“.

Multinational enterprises (MNEs) primarily engage in cross-border activities and invest internationally while the competences of national tax jurisdictions remain limited to the national territory as a matter of principle. To face up to the challenges of globalisation and address the business models that have been developed to match the new economic realities, tax administrations need to strengthen their cooperation and be open to experiment with new forms of collaboration that deepen the exchange of information.

In this context, a coordinated approach to transfer pricing controls would contribute to a better functioning of the internal market on two fronts: it would offer tax administrations a transparent and efficient tool to facilitate the allocation of taxing rights and also prevent the occurrence of double taxation and double non taxation.

In the EU legal order there is a framework that provides Member States’ tax administrations with the tools for cross-border/administrative cooperation.

It is important to use all available tools for administrative cooperation in the best possible way, including bi- and multilateral transfer pricing controls and to consider their improvement where necessary¹.

In the Report on Transfer Pricing Risk Management of the Joint Transfer Pricing Forum (JTPF), it is recommended to take simultaneous controls or joint audits into consideration in appropriate cases while it is recognized that especially at the beginning of this practice, the capacity and experience of one or both tax administrations involved may be limited.²

For this reason the current work programme of the JTPF³ includes the assignment of summarizing Member States’ practices and experiences in the context of simultaneous controls and joint audits as well as providing practical guidance on how to cooperate bi- or multilaterally in transfer pricing controls.

 

OBJECTIVE

 The objective of this paper is to establish a coordinated approach to transfer pricing controls within the EU, in order to avoid double taxation or non-taxation.

Furthermore, it serves as a starting point for analysing which tools, and how, can be improved based on the current EU legal framework.

 

PART 1

THE FRAMEWORK FOR A COOPERATIVE APPROACH TO TRANSFER PRICING CONTROLS IN THE EU

1.1. PRINCIPLES

A fair corporate tax system ensures that profits are allocated where the value is generated and that these profits are not taxed twice. Transfer pricing rules based on the arm’s length principle serve to allocate income earned by a multinational enterprise among those countries in which the company does business. Transfer pricing is highly fact-specific as, generally, the price of each transaction needs to be determined by reference to a comparable transaction. This determination requires the exercise of judgement on the part of both the tax administration and the taxpayer and a review of the transfer pricing methods at several points in the process of a comparability analysis⁴. Therefore, transfer pricing is potentially more subjective than other areas of direct and indirect taxation and, for this reason, sensitive to disputes.

Given this nature of transfer pricing, it is key to develop administrative cooperation at two levels: (i) between the relevant tax administrations; and (ii) between tax administrations and taxpayers.

Cooperation between tax administrations

When the tax authorities of a Member State decide to audit an MNE with taxable activity that extends beyond their taxing jurisdiction (and possibly, beyond the EU), close and transparent cooperation between the relevant Member States’ tax authorities throughout the auditing process could decisively contribute to a successful audit, i.e. an audit that is effective (concluding the review of a case without the need for further procedural steps, e.g. a MAP) and efficient (achieving this aim with a minimum of resources and time).

To this end, tax administrations are encouraged to exchange all foreseeably relevant information in a timely manner and to cooperate for building a common analysis and understanding of the same facts and circumstances of a specific case.

In fact, even a common risk assessment and analysis of the functions, risks and assets related to the cross-border transactions under scrutiny should facilitate a common interpretation of the arm’s length principle.

“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.”

Cooperation between tax administrations and taxpayers

Taking into consideration the recommendations that feature in the JTPF report on transfer pricing risk management and the principles laid out in the Guidelines for a Model European Taxpayers’ Code⁵, the taxpayer, without prejudice to national provisions, should have the right to be kept up-to- date with the milestone developments of 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 in the bi-or multilateral control.

“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.⁶

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.”

1.2 CURRENT CONCEPTS AND TERMS

Various terms are used in the practice of tax administrations and in tax literature to refer to tax- related ‘examinations’ with a cross-border operational dimension.

Presences in administrative offices and participation in administrative enquiries (PAOE)

According to article 11 of Directive 2011/16/EU (the DAC), PAOEs consist in one Member State requesting to be present in another Member States’ offices and/or during administrative enquiries carried out in the territory of the requested Member State. In addition to being present, Member States’ officials may interview individuals and examine records during administrative enquiries – but under the condition that this is permitted under the legislation of the requested Member State.

Simultaneous Controls

According to article 12 of Directive 2011/16/EU (the DAC), simultaneous controls consist in two or more Member States agreeing to audit, in parallel and each in their own territory, one or more related taxpayers which are of common or complementary interest to their respective tax administrations. The main aim is to exchange the obtained information.

Joint Audits

The term Joint Audit is created by the OECD⁷. Under the OECD definition a joint audit involves two or more tax administrations that come together and form a single audit team, in order to examine an issue/set of transactions which pertain to one or more related taxpayers (with cross-border economic activities). Both tax administrations will have a common or complementary interest in the taxpayer(s). The aim of this exercise is to agree on a single audit report at the end and assess the related taxpayers to tax on this basis. Through this process, the tax authorities are expected to form  a more comprehensive understanding of the audited taxpayers’ affairs and conclude with an assessment that does not result in double taxation or non-taxation.

Multilateral Controls

Within the framework of the EU Fiscalis Programme, a multilateral control⁸ is an arrangement where national tax administrations agree to carry out co-ordinated controls of one or more related taxpayers where the control is linked to a common or complementary interest.

The Programme Fiscalis 2020 provides no legal basis itself for the execution of multilateral transfer pricing controls but finances the meetings of tax officials as well as their participation in administrative enquiries carried out abroad.

It is not the aim of this report to confine the various kinds of administrative cooperation to certain pre-defined concepts; rather administrative cooperation should be designed in a way that best fits to the facts and circumstances of each case. On this premise, the term “coordinated transfer pricing controls”, as used in this Report, refers to transfer pricing audits of two or more related entities of the same MNE group which are tax resident in different Member States. The controls are carried out by the tax administration of the Member State where each entity is tax resident in a coordinated manner and within the applicable legal framework (i.e. national rules and EU law).

1.3   LEGAL FRAMEWORK

1.3.1   State of Play

The transfer pricing analysis of cross-border operations in a coordinated transfer pricing control will be based on the available domestic and international legal framework (e.g. treaties, conventions, directives, regulations and domestic law). In the absence of harmonised procedural rules within the EU, tax administrations are therefore bound by the domestic legal framework for tax auditing, such as the statutory review period, audit time limits and confidentiality of data.

Within the EU framework, Directive 2011/16/EU refers to forms of administrative cooperation relevant to cross-border (intra-EU) transfer pricing audits.

Art. 11 of the Directive 2011/16/EU allows tax administrations to agree that foreign officials be present in administrative offices and participate in administrative enquires, interviewing individuals and examining records.

According to the Commission Staff Working Document⁹ on the application of the DAC, this article has not been implemented in a uniform fashion at the national level. Since the entry into force of the Directive, only just over half of Member States have used this provision mainly with neighbouring countries. The provision has been mainly been used in relation to tax residence, the existence of a permanent establishment, transfer pricing, and letterbox companies.

“Recommendation 3:

Member States are encouraged to implement legislation that permits the active presence of visiting foreign officials in accordance with Article 11 of the Directive.”

Art. 12 of Directive 2011/16/EU allows Member States to agree to conduct simultaneous controls, i.e. to audit, each one in their own territory, one or more entities of the same MNE Group with economic activities in different Member States. The aim of such controls is to exchange information obtained during the audit.

According to the Commission Staff Working Document¹⁰ on the application of Directive 2011/16/EU, almost all Member States have either initiated or taken part in simultaneous controls since the entry into force of the Directive. Overall, a total number of 119 simultaneous controls seem to have been initiated by Member States. The controls mainly relate to transfer pricing issues. Yet, to put this number in the correct context, one should consider that more than two Member States may be involved in a simultaneous control.

Although there is no such explicit reference in the Directive, it is extremely important that Member States have the legal framework which allows them to perform corresponding downward adjustments during the coordinated controls as a result of a common understanding of the facts and circumstances and of the application of the arm’s length principle.

“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.”

Annex 1 to this report contains a list of Member States’ national provisions that implement Directive 2011/16/EU, including whether national law currently allows the active and/or passive presence of visiting foreign officials and the possibility of performing downward adjustments as the result of a coordinated transfer pricing control.

1.3.2   Prospects for closer cooperation in transfer pricing controls

It should yet be recognized that in the transfer pricing field, tax administrations do not always share a common interest. This is because, to prevent double taxation, a well-founded primary (upward) adjustment by one tax administration should be followed by a corresponding (downward) adjustment by the other. This implies that the second tax administration would have to reduce its tax base accordingly, which is most probably an option that a tax administration would preferably avoid taking, especially if they have not been directly involved since the beginning of the process.

This said, it is clear that in the field of transfer pricing, a form of collaboration that goes beyond the mere exchange of information and the simultaneous performance of a control is critical for achieving a successful outcome, i.e. eliminate double taxation. Therefore, it would be useful to explore how tax administrations may work together in carrying out coordinated transfer pricing controls based on the assumption that it is in everyone’s interest to avoid double taxation and double non taxation when applying the arm’s length principle. This is particular important since the Dispute Resolution Directive (2017/1852) introduces a formal duty for Member States to remove double taxation.

A form of enhanced cooperation in this context could take the form of a joint audit as described by the OECD. Yet, the term “joint audit” as such does not feature in Directive 2011/16/EU.

This said, it would still be feasible for tax administrations to carry out transfer pricing controls in a way that, in essence, comes close to the concept of a joint audit.

Based on the right to perform simultaneous controls (Art. 12) and be present in administrative enquires of other countries (Art. 11), officials of one Member State can be sent to another Member State, to form a joint audit team with domestic officials and examine the facts and the circumstances of a case.

By agreement between the tax administrations involved foreign officials may be present in the offices where tax administrative authorities of the other Member State(s) carry out their duties and/or during administrative enquires (passive participation). It is also possible that foreign officials be granted the right of active participation via national law in which case, by agreement between the tax administrations involved, they may even interview individuals and examine records.

According to Directive 2011/16/EU, the exchange of information is only required between certain authorities designated specifically for this purpose (EoI competent authorities). To facilitate the exchange of information in real time, the competent authorities may empower the project coordinators or one or more of the auditors of each Member State to exchange information on the findings of the audit directly.

To sum up, if the current EU legal framework was duly and fully implemented in each Member State and accompanied by an appropriate agreement between the respective tax administrations to supply for the presence of foreign officers and the immediate exchange of information, it would create a kind of administrative cooperation which, in essence, would not be less effective than a joint audit, as defined by the OECD Joint Audit Report¹¹ .

The joint audit programme which is already in place between some Member States¹² demonstrates the far-reaching boundaries of administrative cooperation within the current EU legal framework.

Member States are also free to introduce national measures wich facilitate cooperation that go further than the current EU legal framework.

“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.”

 

PART 2

GUIDELINES ON COORDINATION IN TRANSFER PRICING CONTROLS WITHIN THE EU

The second part of this document provides a set of best practices for a coordinated approach to transfer pricing controls. The structure of the chapters is aligned to the JTPF Report on TP Risk Management.

2.1  ORGANIZATIONAL MATTERS

• Raising Awareness

Stakeholders should be aware of the available tools, their advantages and obstacles and whether and how these tools should be used in the case at hand.

• Channels for communication

Administrative cooperation requires the establishment of clear channels for communication.

Secure channels of modern communication like video/internet conferences etc. should be made available to tax administrations for administrative cooperation.

• Flexibility

Due to the absence of harmonized procedural rules for audits in Member States, the time when an audit is performed, the way such an audit is conducted and the rights and obligations of auditors differ within the EU. Thus, a coordinated approach in transfer pricing controls requires flexibility and alignment of the procedural rules as far as possible.

“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.”

2.2  TAXPAYER RIGHTS AND OBLIGATIONS

Tax administrations should guarantee the due respect of taxpayers’ rights derived from national law (including the Constitution) as well as the EU Charter of Fundamental Rights.

Taxpayers should be transparent and, in a timely manner, share all relevant information with the tax administrations involved in the coordinated transfer pricing control. Such cooperative taxpayers should to be heard and be informed on milestones.

As already recommended in the Transfer Pricing Risk Management Report, tax administrations should consider giving taxpayers the right to propose a coordinated transfer pricing control. However, it should be clarified that the taxpayer cannot invoke any such right, unless this is laid down in national law. Nevertheless where tax administrations decide not to pursue a taxpayer’s application, they should endeavour to give an explanation outlining the reasons for this decision.

2.3  INITIAL PHASE

• Cases where a coordinated approach to transfer pricing controls should be considered

Not all transfer pricing audits can be performed in coordination with other Member States. Despite their advantages, coordination and communication between Member States involves a certain degree of administrative burden.

Therefore tax administrations need to balance the advantages of a coordinated approach with the cost and administrative burden of the procedure and their internal capability. It should be noted, however, that although a coordinated approach may involve more complex administration and costs than a unilateral audit, one should consider the administrative burden and costs of unilateral audits that lead to court procedures, Multilateral Agreement Procedures (MAPs) and other dispute settlement mechanisms.

It follows that Member States should choose the most appropriate tool for administrative cooperation in the light of the facts and circumstances of a case and the expected costs and benefits. In the assessment of whether and if so, which tool of administrative cooperation may be used, the following criteria may be helpful:

• There is an added-value compared to the other available means of administrative
• A domestic audit is not sufficient for obtaining the complete picture of a taxpayer’s tax liability in reference to some part of its operations or to a specific
• There are complex transfer pricing issues that pertain to high amounts of corporate income taxes at stake or despite not involving high amounts, the issue is sufficiently important to be examined jointly (e.g. it may affect more taxpayers, future tax years, etc.) .
• The involved tax administrations have a common or complementary interest in the fiscal affairs of one or more related
• The involved tax administrations have different views on the nature of a transaction and there is a need to analyse facts and circumstances in order to prevent double taxation and double non taxation.

Taxpayer selection process

Every tax administration has its own tools and risk assessment programmes for the selection of risks and audit targets. Therefore, the need to perform a coordinated transfer pricing control could arise as a consequence of an internal risk assessment or in the course of a national audit (bottom-up approach). In this case, it is important that the requesting tax administration share all information that justifies the request. Successfully coordinated transfer pricing controls would benefit from strict and fair collaboration between tax administrations already in the phase of risk assessment¹³.

When a tax administration wishes to embark on a joint audit programme with one or more tax administrations, a joint selection process, including a joint risk assessment, would be desirable (top- down approach)¹⁴.

In any case all the information related to the taxpayer selection process should be treated confidentially and remain within the relevant tax administrations.

How to initiate a coordinated transfer pricing control

If the need to perform a coordinated transfer pricing control arises as a consequence of an internal risk assessment or in the course of a national audit (bottom-up approach), the tax administration which is willing to initiate such a control should send a formal request and justify the type of control that it is looking for.

A preliminary discussion between tax administrations may take place in order to establish the feasibility of the request taking into consideration all possible obstacles that may occur, such as the different audit period and statute of limitations.

If a selection process, including a risk assessment, is carried out jointly by two or more tax administrations (top-down approach), they should agree on how to initiate the control and who has to send the formal request.

“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).”

Tax administrations are not obliged to participate in a coordinated transfer pricing control but when they receive a request to this end, they should answer as soon as possible and at the latest, within 2 months from the date of receipt of the request. In case of refusal, tax administrations should explain their position.

Audit preparation

The audit plan should be tailored to the facts and circumstances of the case taking into consideration the domestic law, rules and procedures of the participating tax administrations. Normally, it will identify the following points:

• Scope of the audit (i.e. taxpayers and tax periods to audit);
• Transactions/dealings to analyse and audit information to be collected from the taxpayer for exchange;
• Time milestones ( e.g. when the audit will begin in each Member State and when it will be finalized, agreed time schedule and eventually when and how to exchange information);
• Documents to be prepared;
• Agreement on communication and working language (the solution of art. 3(1) of Dispute Resolution Directive (2017/1852) could be taken into account);
• Rules for carrying out “auditors-in-presence” activity;
• Clear identification of the rights and obligations of tax auditors acting

“Recommendation 8:

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

When a tax administration wishes to promote a sustained programme of administrative cooperation in the form of coordinated transfer pricing controls with one or more tax administrations, it is useful that the respective competent tax authorities sign a Memorandum of Understanding (MoU). Such a MoU should be the framework that lays down all the main principles and practicalities that govern future cooperation in such tax audits.

“Recommendation 9:

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

Annex 2 to this report contains a non-binding template for concluding such a MoU.

2.4    AUDIT PHASE

• Preparation

It is recommended to have an opening meeting between tax auditors in order to agree in advance the audit technique, the questions to ask and the documents to be collected.

Audit performance

In a coordinated transfer pricing control it is essential to keep an open channel of communication during the audit progress. The aim should be to ensure that the time scheduled be respected. The participating tax administrations should always exchange information without undue delay if the tax administration of the other Member State asks for it.

It is good practice to have a regular “checkpoint” meeting in order to discuss and resolve issues in a timely manner as soon as they arise.

Final Phase

The coordinated transfer pricing controls finish when all the planned activities of the audit plan have been completed.

Tax administrations should evaluate the audit findings during a closing meeting and summarize the aspects where they reached a common understanding and those where differences may still remain.

Depending on the kind of administrative cooperation chosen, the final findings may be presented separately or jointly by the participating tax administration to the relevant taxpayers. Any comments by the taxpayers should be taken in due account in the compilation of the concluding report.

Concluding report of the coordinated transfer pricing control

The findings of an audit should be incorporated in a concluding report. To the extent possible, tax administrations should endeavour to arrive at a common interpretation of how the arm’s length principle applies to the findings of a specific audit based on an analysis of the facts and circumstances. Such an agreed outcome would give the highest guarantee that the audit does not result in double taxation.

If the tax authorities reach a common understanding of how the arm’s length principle should be applied to the case under scrutiny, they should follow such understanding in their respective domestic tax assessments.

If the tax authorities cannot reach a common understanding, the concluding report should include at least all relevant facts and circumstances with a clear reference to the points on which the tax administrations managed to agree. In this regard, it would also be useful to explain the reasons for the differences. In view of the possibility of initiating a MAP procedure later, the audit teams should clearly describe the questions in dispute with the aim of facilitating subsequent procedures for dispute resolution¹⁶.

The concluding report on a coordinated transfer pricing control does not have a legal value per se unless it is specifically empowered via national legislation. This is why such concluding report is commonly attached to a document of national origin, which is notified to the taxpayer in accordance with domestic rules.

“Recommendation 10:

It is recommended that each coordinated transfer pricing control finishes with a concluding report.”

It may be the case that the facts and circumstances subject to the audit and their assessment under the arm’s length principle remain unaltered during the tax periods before or after the respective audit period. It should then be ensured that the result of the audit be taken into consideration if the taxpayer applies for ex ante certainty by way of an APA or requests an MAP for solving a dispute that already occurred.

Annex 3 to this report contains a non-binding list of content for the concluding report of the coordinated transfer pricing control.

2.5    RESOLUTION PHASE

A disagreement on the outcome of the audit may arise between the tax administrations or between one or more tax administration and the taxpayer.

Disagreement between tax administrations

In case of disagreement between tax administrations, e.g. where no common agreement on the interpretation of the arm’s length principle can be reached in the concluding report, each tax administration retains, under the current EU legal framework, its own power to tax in accordance with its own law and judgment.

If the disagreement between tax authorities result in a question of dispute that is eligible for a MAP, and a MAP procedure is opened, it would be useful that the MAP competent authority takes the facts and circumstances that were already agreed in the concluding report into consideration.

Furthermore, a comprehensively elaborated question of dispute could help speed up the Mutual Agreement Procedure and/or the submission to arbitration, if appropriate. However, it is important to underline that the MAP competent authority, although competent authorities and audit functions may belong to the same tax administration, should maintain a degree of autonomy from the audit function of the tax administration in order to ensure the independence of any subsequent review of a case by the MAP competent authority¹⁷. Yet, this should not mean that it has to act in isolation.

Disagreement between tax administrations and taxpayers

In case of disagreement between the taxpayer and one or more tax administration, i.e. where the taxpayer did not agree with the interpretation of the arm’s length principle by one or more tax administration, the taxpayer maintains the right to appeal under domestic law and require a MAP procedure.

In this case, the tax administrations can suspend making the agreed downward adjustment until a definitive decision be reached by the MAP competent authority or the judicial authority.

2.6    FOLLOW UP PHASE

It is important to grant tax certainty to the taxpayer.

Where tax administrations have reached a common conclusion in a coordinated transfer pricing control, they should refrain from taking different position in future unilateral audits unless the facts and circumstances have changed.

The outcome of coordinated transfer pricing controls could facilitate the procedure of bilateral APAs or MAPs.

 

CLOSING REMARKS

A cooperative approach to coordinated transfer pricing controls presents a number of definite advantages in overcoming the risk of diverging assessments between stakeholders when applying transfer pricing in accordance with the arm’s length principle.

Provided that the requisite legal framework is implemented by the Member States¹⁸ it is feasible to engage in procedures with a legal base in the Directive which present features similar to joint audits. To this end, Member States have the option to introduce domestic legislation that can support such administrative cooperation on a bilateral or multilateral basis.

This said it would be useful to collect data on the cooperative Member States’ approaches to transfer pricing controls in order to evaluate whether the current legal framework needs to be improved.

The JTPF should consider working in the future to develop a common methodology for transfer pricing audits.

In addition further elaboration regarding cooperative compliance initiatives within the EU framework, such as a high-level risk assessment in the field of transfer pricing should also be considered by the JTPF as a future field of work.

Notes

1 Section 19 of the Action Plan to strengthen the fight against tax fraud and tax evasion, of 2012 (COM (2012)722) stated that to facilitate tax audits and pave the way towards possible future joint audits in the short term, it is essential that Member States make the widest possible use of the existing legal framework, in order to organise simultaneous controls and facilitate the presence of foreign officials in the offices of tax administrations and during administrative enquiries. A similar point was reiterated more recently in the Commission Report on the application of the Directive on administrative cooperation in direct taxation (COM(2017) 781 final).

2 See Recommendations 9a and 9b of the JTPF report on Transfer Pricing Risk Management (DOC: JTPF/007/FINAL/2013/EN), endorsed by the Council on 10 March 2015.1 Section 19 of the Action Plan to strengthen the fight against tax fraud and tax evasion, of 2012 (COM (2012)722) stated that to facilitate tax audits and pave the way towards possible future joint audits in the short term, it is essential that Member States make the widest possible use of the existing legal framework, in order to organise simultaneous controls and facilitate the presence of foreign officials in the offices of tax administrations and during administrative enquiries. A similar point was reiterated more recently in the Commission Report on the application of the Directive on administrative cooperation in direct taxation (COM(2017) 781 final).

3 DOC: JTPF/005/FINAL/2015/EN (point 3.3.1).

4 Par 1.13 and 2.74 OECD TPG.

5  Document           of           the           Commission            services,           DG           TAXUD,           online           at: https://ec.europa.eu/taxation_customs/business/tax-cooperation-control/guidelines-model-european- taxpayers-code_en

6 It should however be stressed that, according to Recommendation 1 of TP Risk Management Report, such cooperative approach is only recommended when dealing with a cooperative taxpayer.

7 OECD Joint Audit Report (September 2010).

8 Article 7 of Regulation (EU) No 1286/2013 of the European Parliament and the Council of 11^TH December 2013, establishing an action programme to improve the operation of taxation systems in the European Union for the period 2014-2020 (Fiscalis 2020) and repealing Decision No 1482/2007/EC.

9 Commission staff working document accompanying the Report from the Commission to the EU Parliament and Council on the application of Council Directive (EU) no. 2011/16/EU on administrative cooperation in the field of direct taxation SWD/2017/0462 final

https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=SWD:2017:462:FIN&from=EN

10 see note 9.

11 See footnote 7.

12 The Joint Audit pilot project Germany/The Netherlands has been presented during the JTPF meeting of 18 February 2016. The Joint Audit programme Germany/Italy has been presented during the JTPF meeting of 26 June 2018.

13 EU JTPF Report on TP Risk Management R. 5.
When tax administrations agree on a coordinated approach to the audit, it is crucial to prepare the audit process. For ensuring an efficient audit, it is important to jointly agree an audit plan for each coordinated transfer pricing control¹⁵.

14 See Recommendation 10.

15 Annex 1 of the JTPF report on Risk management JTPF/007/FINAL/2013 contains an example of a TP audit work plan that may be used as a starting point.

16 DRM Directive

¹⁷ Point c of the revised Code of Conduct for the effective implementation of the Arbitration Convention

18 See recommendation 3.

Annex 1: List of Member States’ national provisions that implement Directive 2011/16/EU, including whether national law currently allows the active and/or passive presence of visiting foreign officials and the possibility to perform downward adjustment as result of a coordinated transfer pricing control.

 

ANSWERS
↓ Member States Questions →		Passive participation		Active participation		Downward adjustments
		Legal provision allowing the presence in administrative offices	Legal provision allowing the presence in administrative enquires	Legal provisions allowing the interview of individuals	Legal provisions allowing the examination of records	Legal provisions allowing to perform downward adjustments as a result of a coordinated transfer pricing control
AT	Austria	YES	YES	YES	YES	YES
BE	Belgium	YES	YES	NO	NO	YES
BG	Bulgaria	YES	YES	YES	YES	YES
CY	Cyprus	YES	YES	NO	NO	NO
CZ	Czechia	YES	YES	YES	YES	NO
DE	Germany	YES	YES	YES	YES	UNDER CERTAIN CIRCUMSTANCES
DK	Denmark	YES	YES	NO	NO	YES
EE	Estonia	YES	YES	YES	YES	YES
ES	Spain	YES	YES	NO	NO	UNDER CERTAIN CIRCUMSTANCES
FI	Finland	YES	YES	YES	YES	NO
FR	France	YES	YES	YES	YES	NO
GB	United Kingdom	YES	YES	NO	NO	NO
GR	Greece	YES	YES	NO	NO	NO
HR	Croatia	YES	YES	NO	NO	YES
HU	Hungary*	n.a.	n.a.	n.a.	n.a.	n.a.
IE	Ireland	YES	YES	NO	NO	NO
IT	Italy	YES	YES	YES	YES	YES
LT	Lithuania	YES	YES	YES	YES	YES
LU	Luxembourg	NO	NO	NO	NO	YES
LV	Latvia	YES	YES	NO	NO	NO
MT	Malta	YES	YES	YES	YES	YES
NL	Netherlands	YES	YES	YES	YES	YES
PL	Poland	YES	YES	NO	NO	NO
PT	Portugal	YES	YES	YES	YES	YES
RO	Romania	YES	NO	NO	YES	YES
SE	Sweden	YES	YES	NO	NO	NO
SI	Slovenia	YES	YES	NO	NO	YES
SK	Slovakia	YES	YES	YES	YES	NO