Foreign Activities

EU-Wide Harmonisation of Transfer Pricing Regulations in Sight

From 1 Ja­nu­ary 2026, har­mo­nised trans­fer pri­cing ru­les are to be in force across all EU mem­ber sta­tes. The pro­po­sal from the EU Com­mis­sion is on the ta­ble, but the Eu­ro­pean le­gis­la­tive pro­cess still needs to be com­ple­ted.

Spe­ci­fi­cally, the EU Com­mis­sion pre­sen­ted on 12 Sep­tem­ber 2023 a draft di­rec­tive for an EU Trans­fer Pri­cing Di­rec­tive as part of a broa­der con­cept for the EU-wide har­mo­ni­sa­tion of the tax base for the cor­po­rate ta­xa­tion of large com­pa­nies, of­fi­ci­ally na­med "Pro­po­sal for a Coun­cil Di­rec­tive on Busi­ness in Eu­rope: Frame­work for In­come Ta­xa­tion (BE­FIT) and Pro­po­sal for a Coun­cil Di­rec­tive on Trans­fer Pri­cing".

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Alt­hough there are al­re­ady sub­stan­tial si­mi­la­ri­ties in the trans­fer pri­cing re­gu­la­ti­ons of EU mem­ber sta­tes, as they of­ten align with the OECD Trans­fer Pri­cing Gui­de­lines, the OECD re­com­men­da­ti­ons re­gu­larly al­low for si­gni­fi­cant dis­cre­tion and room for in­ter­pre­ta­tion, which can be dif­fer­ently im­ple­men­ted in the na­tio­nal pro­vi­si­ons of EU mem­ber sta­tes and other OECD coun­tries. Com­pli­ance with trans­fer pri­cing re­gu­la­ti­ons across va­rious EU coun­tries thus leads to con­side­ra­ble ad­mi­nis­tra­tive ef­fort for mul­ti­na­tio­nal cor­po­rate groups and si­gni­fi­cant risks of dou­ble ta­xa­tion, which can only be eli­mi­na­ted th­rough time-con­su­ming and costly mu­tual agree­ment pro­ce­du­res. The EU Com­mis­sion aims to coun­ter­act this wi­thin the EU.

The­re­fore, the draft di­rec­tive in­clu­des, among other things, the fol­lo­wing pro­vi­si­ons, which un­like the BE­FIT pro­po­sals are in­ten­ded not only for large cor­po­rate groups, i.e., those with a group tur­no­ver of more than 750 mil­lion eu­ros, but ra­ther for all in­ter­na­tio­nally ope­ra­ting cor­po­rate groups with ac­tivi­ties in the EU:

  • Man­datory pre­scrip­tion and uni­form im­ple­men­ta­tion of the arm's length prin­ci­ple/man­datory ap­pli­ca­tion of the OECD Trans­fer Pri­cing Gui­de­lines as a bench­mark,
  • a com­mon de­fi­ni­tion of re­la­ted par­ties, in par­ti­cu­lar by set­ting mi­ni­mum par­ti­ci­pa­tion of 25% and ad­opting the so-cal­led Aut­ho­ri­zed OECD Ap­proach (AOA) for per­ma­nent es­ta­blish­ments,
  • ap­pli­ca­tion of the most ap­pro­priate trans­fer pri­cing me­thod out of the five es­ta­blis­hed OECD me­thods (no hier­ar­chy of me­thods),
  • stan­dar­di­zed re­gu­la­tion for nar­ro­wing the range of com­pa­ra­ble arm´s length va­lues (in­ter­quar­tile ex­ami­na­tion),
  • crea­tion of a stan­dard pro­cess for the swift im­ple­men­ta­tion of cor­re­spon­ding ad­just­ments to eli­mi­nate dou­ble ta­xa­tion re­sul­ting from trans­fer pri­cing cor­rec­tions ("fast track"),
  • har­mo­ni­sa­tion of pro­ce­du­res for year-end ad­just­ments,
  • pro­vi­sion for the EU Com­mis­sion to pro­pose de­tai­led re­gu­la­ti­ons on spe­ci­fic to­pics, in­clu­ding EU-wide Safe Har­bour Ru­les (e.g., for rou­tine dis­tri­bu­tion ac­tivi­ties and rou­tine ma­nu­fac­tu­ring ac­tivi­ties).

Note: To give EU mem­ber sta­tes suf­fi­ci­ent time to im­ple­ment the di­rec­tive into na­tio­nal law, the le­gis­la­tive pro­cess for an EU Trans­fer Pri­cing Di­rec­tive would need to pro­ceed swiftly. So far, no ne­go­tia­tion re­sults with the EU mem­ber sta­tes have been re­por­ted, which may be due to the in­te­gra­tion into the much more com­pre­hen­sive BE­FIT con­cept.

From a Ger­man per­spec­tive, the pro­po­sed EU har­mo­ni­sa­tion is cer­tainly wel­come, as a large part of the pro­po­sed re­gu­la­ti­ons is al­re­ady in­clu­ded in a com­pa­ra­ble form in the na­tio­nal law. Mo­re­over, a uni­fi­ca­tion of trans­fer pri­cing re­gu­la­ti­ons is li­kely to si­gni­fi­cantly re­lieve com­pli­ance bur­dens for cor­po­rate groups and their ac­tivi­ties wi­thin the EU space and re­duce the risks of dou­ble ta­xa­tion from trans­fer pri­cing cor­rec­tions.

Howe­ver, un­til the EU Trans­fer Pri­cing Di­rec­tive is ad­op­ted and im­ple­men­ted in the EU, it is ne­cessary to con­ti­nue working with the exis­ting re­gu­la­ti­ons of the in­di­vi­dual coun­tries and to take them into ac­count in the de­ter­mi­na­tion and do­cu­men­ta­tion of trans­fer pri­ces.

Learn more about the cur­rent chal­len­ges and ex­pec­ted de­ve­lop­ments in the trans­fer pri­cing area in our webi­nar "Trans­fer Pri­ces - Up­date on Prac­tically Re­le­vant De­ve­lop­ments and In­no­va­ti­ons" on 19 March 2024.


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