scholarly journals Transfer pricing rules in EU member states

2010 ◽  
Vol 58 (3) ◽  
pp. 243-250 ◽  
Author(s):  
Veronika Solilová
Keyword(s):  
Free Market ◽  
Transfer Pricing ◽  
Transfer Price ◽  
Market Conditions ◽  
Member States ◽  
Tax Havens ◽  
Eu Member States ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
Accepted Standard

One of the important area of international taxes is transfer pricing. Transfer price is a price set by a taxpayer when selling to, buying from, or sharing resources with a related (associated) person. The tran­sac­tions between these persons should be assessed at their arm’s length price in according the arm’s length principle – international accepted standard – as the price which would have been agreed between unrelated parties in free market conditions. This paper is focused on the tranfer pricing rules used in particular EU Member States so as if EU Member States apply the arm’s length principle, define the related persons, apply recommendations of the OECD Guidelines, use the transfer pricing methods, require TP Documentation, exercise specific transfer pricing audit or impose specific penalties and apply APAs. Transfer pricing rules should prevent taxpayers from shifting income to related person organized in tax havens or in countries where they enjoy some special tax benefit.

scholarly journals The Main Stages of Normative Regulation of Financial Control Over Transfer Pricing in Ukraine

2021 ◽  
Vol 4 (519) ◽  
pp. 196-204
Author(s):  
M. O. Kuzheliev ◽  
◽  
I. M. Syvolap ◽  
Keyword(s):  
Transfer Pricing ◽  
National Level ◽  
Financial Control ◽  
National Legislation ◽  
Tax Legislation ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
Constant Change ◽  
Business Entities ◽  
Stage 1

Any activity is carried out in accordance with what laws and regulations are interpreted at the national level, and often with the direct consent o n the part of the State authorities. In Ukraine, the process of forming the normative regulation for control over transfer pricing is still underway, but conceptually it is already possible to define four main stages. Stage 1 (zero stage): 2010–2013 – in the national legislation were no definitions of controlled operations and transfer pricing, but the concept of ordinary price was widely used, and the tax legislation began to distinguish the methods for its determination and the procedure for application). Stage 2 (baseline stage): 2013–2014 – a significant transformation of tax legislation took place – transfer pricing was introduced in Ukraine. Stage 3 (crucial stage): 2015–2019 – the «arm’s length principle» was introduced, which was wider than the concept of «ordinary price», and relations between business entities were now evaluated not only at the price of transactions performed, but under the conditions of such operations. Stage 4 (renewal stage): 2020–2021 – transfer pricing rules were updated: new concepts were introduced into the national legislation – international group of companies, the group’s parent company, authorized participant; a three-level transfer pricing reporting model was implemented. Thus, Ukraine undergoes a constant change of national legislation, in particular in the normative regulation of financial control over transfer pricing, which for 10 years has been transformed from control over ordinary prices in the country to control over transactions of international groups of companies whose participants are residents of Ukraine.

scholarly journals Transfer pricing and the Czech tax policy

2010 ◽  
Vol 58 (6) ◽  
pp. 465-472 ◽  
Author(s):  
Veronika Solilová ◽  
Veronika Sobotková
Keyword(s):  
Czech Republic ◽  
Open Economy ◽  
Tax Policy ◽  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Small Open Economy ◽  
Tax Base ◽  
The Czech Republic ◽  
Eu Member States ◽  
Pricing Rules

The Czech Republic as a small open economy with an extensive network of the international tax treaties for the avoidance of the double taxation prevents from shifting the tax base of the associated enterprises to countries with preferential tax regime through transfer pricing rules. Transfer pricing as one of the important areas of international taxes determines how the profits of the multinational enterprises are split between the jurisdictions in which they operate and which countries get to tax those profits. This situation may affect the global budget of the multinational enterprises and the tax reve­nues of the jurisdictions. This paper is focused on the transfer pricing rules used in the Czech Republic and makes recommendations for the Czech tax policy in this area based on the analysis of the transfer pricing rules in the EU Member States.

scholarly journals Profit shifting in Brazil and the impact of tax havens

2021 ◽  
Vol 32 (85) ◽  
pp. 95-108
Author(s):  
Alex A. T. Rathke
Keyword(s):  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Profit Maximization ◽  
Profit Shifting ◽  
Tax Havens ◽  
Tax Rate ◽  
Pricing Rules ◽  
Robust Least Squares ◽  
High Level ◽  
The Impact

ABSTRACT We investigate tax-induced profit shifting in Brazil and the impact of tax havens on the shifting behavior of firms. Profit shifting research in Brazil is virtually non-existent, although the shifting incentives in Brazil are prominent. Our research fills this gap with evidences in the novel Brazilian context. Profit shifting is a tax-minimization strategy where multinational enterprises perform intra-firm transactions to allocate taxable profits to low-tax locations. Brazil combines a remarking set of profit shifting incentives, especially a high corporate tax rate, extremely complex tax system, and distinguished transfer pricing rules. Further researches may leverage from the shifting incentives in Brazil, since it provides opportunities to investigate additional factors that affect the shifting behavior of firms. We analyze 989 transaction-by-country observations for the period of 2010-2017. Baseline analysis follows the robust least squares approach with controlling covariates. Linear estimate model derives from the conventional Cobb-Douglas production function, to analyze the impact of shifting incentives on profit maximization. We find that Brazilian firms have a high level of intra-firm transactions with related parties located in low-tax countries, especially with tax havens. It represents a strong evidence of profit shifting behavior in Brazilian firms.

scholarly journals DEVELOPMENT OF TRANSFER PRICING IN THE CONDITIONS OF GLOBALIZATION AND WAYS TO INCREASE THE EFFICIENCY OF THE TRANSFER PRICE REGIME

2021 ◽  
Author(s):  
Inna Korin
Keyword(s):  
Global Economy ◽  
Transfer Pricing ◽  
Practical Significance ◽  
Tax Havens ◽  
Economic Relations ◽  
Arm’S Length Principle ◽  
Financial Interests ◽  
Business Confidence ◽  
Market Relations ◽  
Pricing Schemes

The mechanism of enterprises pricing for moving the main share of profits abroad to low-tax havens has been investigated. The analysis of the existing conflict of interest between MNEs is carried out, they seek to obtain super-profits and the fiscal authorities, must ensure proper control over taxation by introducing the arm's length principle. The article shows the complexity and versatility of the rules of tax control over transfer pricing. The influence of the main factors on the current methods of taxation of enterprises is determined. The nature of transfer pricing risks is characterized and the main tasks of the tax authorities are identified, which is to maximize results, while ensuring business confidence in the tax system. It is shown that transfer pricing schemes are carried out using various techniques of aggressive tax planning, requiring the introduction of additional countermeasures. In the study of transfer pricing in the context of globalization and transnationalization of international relations, it was found that due to the processes of globalization, intersectoral pricing has become a daily necessity for the vast majority of enterprises. The transfer pricing mechanism is the basis of the latest approaches to pricing in the global economy, thereby distorting the level of world fair prices. In modern conditions of development and complication of market relations, there are rapid processes of strengthening foreign economic relations of domestic economic entities and the total manifestation of globalization processes. Due to the fact that globalization is gaining momentum, it is becoming increasingly difficult to maintain the current methods of taxation of TNCs operating in different tax jurisdictions. Transfer pricing is one of the most important aspects of tax minimization in multinational companies. At the same time, the financial interests of the state are expressed in the amount of tax revenues, the solution of this contradiction makes it necessary to improve the tax regulation of transfer pricing between interdependent persons. The practical significance of the research results obtained lies in the possibility of their use in the formation of an appropriate legislative and regulatory framework.

scholarly journals The Harmonisation of Transfer Pricing: the Obstacles, the Arm's Length Principle and the OECD Guidelines

2021 ◽  
Author(s):  
◽  
Duran Timms
Keyword(s):  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Legal Obligation ◽  
Fair Share ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
Significant Obstacle ◽  
Domestic Law

<p>This essay argues that the complete harmonisation of transfer pricing rules with the arm’s length principle is unattainable for three reasons. First, states are not under a legal obligation to apply the principle outside of treaty or domestic law. Second, the theoretical shortcomings of the principle are creating a divergence from the OECD guidelines on how the principle should be applied. Third, the perception held by states that multinational enterprises are not paying a fair share of tax is also creating a divergence from the OECD guidelines on the principle. The resultant divergence is a significant obstacle to transfer pricing harmonisation.</p>

scholarly journals The Harmonisation of Transfer Pricing: the Obstacles, the Arm's Length Principle and the OECD Guidelines

2021 ◽  
Author(s):  
◽  
Duran Timms
Keyword(s):  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Legal Obligation ◽  
Fair Share ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
Significant Obstacle ◽  
Domestic Law

<p>This essay argues that the complete harmonisation of transfer pricing rules with the arm’s length principle is unattainable for three reasons. First, states are not under a legal obligation to apply the principle outside of treaty or domestic law. Second, the theoretical shortcomings of the principle are creating a divergence from the OECD guidelines on how the principle should be applied. Third, the perception held by states that multinational enterprises are not paying a fair share of tax is also creating a divergence from the OECD guidelines on the principle. The resultant divergence is a significant obstacle to transfer pricing harmonisation.</p>

Integrating Managerial and Tax Objectives in Transfer Pricing

2004 ◽  
Vol 79 (3) ◽  
pp. 591-615 ◽  
Author(s):  
Tim Baldenius ◽  
Nahum D. Melumad ◽  
Stefan Reichelstein
Keyword(s):  
Income Tax ◽  
Marginal Cost ◽  
Multinational Firms ◽  
Transfer Pricing ◽  
Market Price ◽  
Weighted Average ◽  
Transfer Price ◽  
Tax Rates ◽  
Pricing Rules ◽  
Internal Transfer

This paper examines transfer pricing in multinational firms when individual divisions face different income tax rates. Assuming that a firm decouples its internal transfer price from the arm's length price used for tax purposes, we analyze the effectiveness of alternative pricing rules under both cost- and market-based transfer pricing. In a tax-free world, Hirshleifer (1956) advocated that the internal transfer price be set equal to the marginal cost of the supplying division. Extending this solution, we argue that the optimal internal transfer price should be a weighted average of the pre-tax marginal cost and the most favorable arm's length price. When the supplying division also sells the intermediate product in question to outside parties, the external price becomes a natural candidate for the arm's length price. We argue that for internal performance evaluation purposes firms should generally not value internal transactions at the prevailing market price if the supplying division has monopoly power in the external market. By imposing intracompany discounts, firms can alleviate attendant double marginalization problems and, at the same time, realize tax savings due to differences in income tax rates. Our analysis characterizes optimal intracompany discounts as a function of the market parameters and the divisional tax rates.

Tax and Incentive Trade-Offs in Multinational Transfer Pricing

2002 ◽  
Vol 17 (3) ◽  
pp. 209-236 ◽  
Author(s):  
Michael Smith
Keyword(s):  
Performance Measures ◽  
Transfer Pricing ◽  
Managerial Incentives ◽  
Transfer Price ◽  
Tax Rate ◽  
Ex Post ◽  
Trade Offs ◽  
Pricing Rules ◽  
Ex Ante ◽  
Transfer Prices

Multinationals use transfer prices both for tax minimization and for managerial incentives. This paper analyzes two methods of disentangling the tax and incentive roles: setting multiple prices and using performance measures independent of transfer prices. Even with imperfect enforcement of transfer-pricing rules, regulator scrutiny limits the firm's flexibility. Transfer prices affect after-tax income both by influencing the manager's production decisions ex ante and by allocating income ex post across tax jurisdictions. If the ex ante incentive role dominates the ex post tax role, the firm increases the transfer price received by the subsidiary even if the subsidiary tax rate increases.

scholarly journals Analysis Method of Transfer Pricing Used by Multinational Companies Related to Tax Avoidance and its Consistencies to the Arm's Length Principle

2015 ◽  
Vol 6 (3) ◽  
pp. 341
Author(s):  
Nuraini Sari ◽  
Ririn Susanti Hunar
Keyword(s):  
Transfer Pricing ◽  
Tax Avoidance ◽  
Multinational Companies ◽  
Action Plans ◽  
Analysis Method ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
International Tax

The purpose of this study is to evaluate about how Starbucks Corporation uses transfer pricing to minimize the tax bill. In addition, the study also will evaluate how Indonesia’s domestic rules can overcome the case if Starbucks UK case happens in Indonesia. There are three steps conducted in this study. First, using information provided by UK Her Majesty's Revenue and Customs (HMRC) and other related articles, find methods used by Starbucks UK to minimize the tax bill. Second, find Organisation for Economic Co-Operation and Development (OECD) viewpoint regarding Starbucks Corporation cases. Third, analyze how Indonesia’s transfer pricing rules will work if Starbucks UK’s cases happened in Indonesia. The results showed that there were three inter-company transactions that helped Starbucks UK to minimize the tax bill, such as coffee costs, royalty on intangible property, and interest on inter-company loans. Through a study of OECD’s BEPS action plans, it is recommended to improve the OECD Model Tax Convention including Indonesia’s domestic tax rules in order to produce a fair and transparent judgment on transfer pricing. This study concluded that by using current tax rules, although UK HMRC has been disadvantaged because transfer pricing practices done by most of multinational companies, UK HMRC still cannot prove the transfer pricing practices are not consistent with arm’s length principle. Therefore, current international tax rules need to be improved.

Category of Market Price in Modern Tax Law

2016 ◽  
Vol 4 (7) ◽  
pp. 0-0
Author(s):  
Инна Хаванова ◽  
Inna Khavanova
Keyword(s):  
Transfer Pricing ◽  
Action Plan ◽  
Market Price ◽  
Profit Shifting ◽  
Complex Issue ◽  
Regulatory Changes ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
The Difference ◽  
Correct Application

The article is devoted to transfer pricing rules with particular reference to unresolved problems. Its purpose is to outline the complex issue of transfer pricing. The author examines the difference between the concepts of “market price” and price, determined according to the “arm’s length principle”, discusses the basic rules of taxation, principles of determining the price of goods, work or services for taxation purposes. To ensure the correct application of the separate entity approach, countries have adopted the arm&#180;s length principle. This article analyzes initiatives on taxation in the area of corporate taxation (OECD Action Plan on Base Erosion and Profit Shifting (BEPS), Final Reports “Aligning Transfer Pricing Outcomes with Value Creation”). The author points out that the level of control (direct or indirect) in determining interdependence between persons, has its own specific features in different states. The reason behind it is that the problem of transfer pricing does not always arise, but only when subjects establish specific relations. The article characterizes the regulatory changes and developments in Russia.

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