TPG2022 Chapter IV paragraph 4.16

Category: B. Transfer pricing compliance practices | Tag:
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In practice, neither countries nor taxpayers should misuse the burden of proof in the manner described above. Because of the difficulties with transfer pricing analyses, it would be appropriate for both taxpayers and tax administrations to take special care and to use restraint in relying on the burden of proof in the course of the examination of a transfer pricing case. More particularly, as a matter of good practice, the burden of proof should not be misused by tax administrations or taxpayers as a justification for making groundless or unverifiable assertions about transfer pricing. A tax administration should be prepared to make a good faith showing that its determination of transfer pricing is consistent with the arm’s length principle even where the burden of proof is on the taxpayer, and taxpayers similarly should be prepared to make a good faith showing that their transfer pricing is consistent with the arm’s length principle regardless of where the burden of proof lies.






Related Guidelines

  1. TPG2022 Chapter IV paragraph 4.14When transfer pricing issues are present, the divergent rules on burden of proof among OECD member countries will present serious problems if the strict legal rights implied by those rules are used as a guide for appropriate behaviour. For example, consider the case...
  2. TPG2022 Chapter IV paragraph 4.13In jurisdictions where the burden of proof is on the taxpayer, tax administrations are generally not at liberty to raise assessments against taxpayers which are not soundly based in law. A tax administration in an OECD member country that applies the arm’s length...
  3. TPG2022 Chapter IV paragraph 4.17The Commentary on paragraph 2 of Article 9 of the OECD Model Tax Convention makes clear that the State from which a corresponding adjustment is requested should comply with the request only if that State “considers that the figure of adjusted profits correctly...
  4. TPG2022 Chapter IV paragraph 4.15Consider the same facts as in the example in the preceding paragraph. If the burden of proof is again guiding behaviour, a taxpayer in the first jurisdiction being a subsidiary of a taxpayer in the second jurisdiction (notwithstanding the burden of proof and...
  5. TPG2022 Chapter V paragraph 5.2This chapter provides guidance for tax administrations to take into account in developing rules and/or procedures on documentation to be obtained from taxpayers in connection with a transfer pricing enquiry or risk assessment. It also provides guidance to assist taxpayers in identifying documentation...
  6. TPG2022 Chapter IV paragraph 4.12The implication for the behaviour of the tax administration and the taxpayer of the rules governing burden of proof should be taken into account. For example, where as a matter of domestic law the burden of proof is on the tax administration, the...
  7. TPG2022 Chapter IV paragraph 4.5This section describes three aspects of transfer pricing compliance that should receive special consideration to help tax jurisdictions administer their transfer pricing rules in a manner that is fair to taxpayers and other jurisdictions. While other tax law compliance practices are in common...
  8. TPG2022 Preface paragraph 18In seeking to achieve the balance between the interests of taxpayers and tax administrators in a way that is fair to all parties, it is necessary to consider all aspects of the system that are relevant in a transfer pricing case. One such...
  1. July 2018: Transfer Pricing Practices in the Oil Sector, and their Potential Application to MiningIn July 2018 Center for Global Development published a study of special transfer pricing practices in the oil sector, and their potential application to hard rock minerals. According to the study, governments of mining countries are vulnerable to investors manipulating transfer prices as...
  2. EU: Public Country-by-Country Reporting?Proposal directive of public country-by-country reporting in the EU Ministers held an exchange of views (public session) on how to take the proposed directive forward. Tax transparency is a fundamental principle in any democratic society. It enables policy makers to take informed decisions...

Related Case Law

  1. Italy vs INTERVET PRODUCTIONS SRL, January 2021, Corte di Cassazione, Case No 22539/2021Intervet Productions SRL, a company resident in Italy, manufactures veterinary medicines and supplements. The Italian tax authorities issued a notice of assessment, relating to the 2004 tax year. In that notice, the tax authorities ascertained the inconsistency of the transfer prices concerning the...
  2. Germany vs “Trademark GmbH”, November 2006, FG München, Case No 6 K 578/06A German company on behalf of its Austrian Parent X-GmbH distributed products manufactured by the Austrian X-KG. By a contract of 28 May 1992, X-GmbH granted the German company the right to use the trade mark ‘X’ registered in Austria. According to the...
  3. Italy vs Alfa Gomma SUD s.r.l. July 2014, Supreme Court 16480The tax authorities had issued an assessment where deductibility of service costs charged to an Italien company had been disallowed for tax purposes, as the Italien company – according to the tax authorities – had not provided sufficient proof of the alleged benefits...
  4. Czech Republic vs. Českolipská, a. s. January 2011, Supreme Administrative Court 7 Afs 74-2010-81A lessor rented real estate for a low price to related parties.  The tax authorities claimed that the price was too low and required additional income to be taxed with the lessor. The lessor explained that the low rental fees were due to...