The next meeting of the EU Joint Transfer Pricing Forum (EU JTPF) is scheduled for 18 February 2016.

The EU JTPF aims to provide tools for practical application of transfer pricing rules in the EU and ensure efficient transfer pricing administration. Projects discussed by the EU JTPF pass through an initial phase of assessment, scoping and discussion and then move to the subsequent phase of formulation of a report making recommendations.

Issues currently being considered by the EU JTPF as part of its work program for 2015 to 2019 include the increased importance of economic analysis in transfer pricing; and the use of EU-tailored tools including implementation of recommendations of the OECD project on base erosion and profit shifting (BEPS) by EU member countries. Ensuring efficient transfer pricing administration includes identification of risk, for example using country by country reporting to identify transfer pricing risk; the impact of the BEPS project on EU transfer pricing documentation; and tax audit and dispute resolution issues.

Use of comparables in the EU

A current area of consideration by the EU JTPF is the use of comparables in the EU. At their last meeting the EU JTPF discussed a paper on scoping the work on comparables and decided to prioritize discussion of guidance on comparability and the use of pan-European comparables. The work will focus on working with the information actually available rather than on improving the availability of data. Guidance will be developed on common comparability adjustments and how to deal with arm’s length ranges, and there will be discussion of the relevant of differences in accounting standards in the comparability analysis.

The guidance on comparability would cover not just the transactional net margin method (TNMM) but also other transfer pricing methods. The search for comparable data would cover internal comparables and collections of statistical data in addition to the commercial databases.

The OECD is also developing a toolkit on comparability in relation to base erosion and profit shifting (BEPS) and developing countries and this is to be finalized in late 2016 or early 2017. There will be a need for consistency between the two workflows. The EU JTPF will begin by considering the situation in the EU and take into account OECD developments.

Pan-European comparables

The issue of pan-European comparables was last examined by the EU JTPF in 2004. The issue is closely linked to the other issues on comparable information and the EU JTPF will therefore reconsider the issue and review the guidance previously given.

Economic valuation techniques in the EU

The EU JTPF will work on practical guidance on economic valuation techniques rather than theoretical points. These techniques are frequently applied in third party transactions and the JTPF will look at the practical issues involved in their application to transfer pricing. Member states have suggested that they lack examples of actual cases where economic valuation techniques have been used in business transactions and there is a view that the tax specialists of multinational companies are reluctant to use these methods.

The non-governmental representatives were in support of developing simplified mechanisms for application of these techniques but member states were concerned that if simplified measures were developed these would become the norm. These methods are not in themselves a separate transfer pricing method but are a tool for use in transfer pricing studies.

Country by Country Reporting

With regard to the implementation of the OECD’s recommendations on country by country (CbC) reporting by EU member states the EU JTPF could consider work on clarification of definitions; clarification of guidelines; a common approach on language’; EU law implications; and timing and implementation. The non-governmental representatives have emphasized the importance of developing guidance and would give support in identifying the most urgent issues arising. The EU JTPF will not consider any national or regional interpretations of the information to be included in the CbC reports because this would undermine global comparability.

The EU JTPF will work towards a discussion of the issues arising from preparing CbC reports and the paths to addressing those issues. The guidance will not be too prescriptive and may not lead to a formal code of conduct. A discussion of the concrete issues may take place at the 18 February 2016 meeting.