Brussels, 7 December 2004
The Commission has welcomed the adoption by the Council of a Code of Conduct to eliminate the double taxation that can arise where an EU Member State, by making a transfer pricing adjustment, increases the taxable profits of a company from its cross-border intra-group transactions. The Code will ensure a more effective and uniform application by EU Member States of the 1990 Arbitration Convention (90/436/EEC) that is designed to deal with such double taxation. The Code establishes rules such as the starting points of time limits for dealing with complaints and practical arrangements concerning the mutual agreement and arbitration phases of the Convention. It recommends the suspension of tax collection during the dispute resolution period. The Code is based on a Commission proposal of April 2004 (see IP/04/542 and MEMO/04/96) arising from the work of the EU Joint Transfer Pricing Forum (see IP/02/1105). The Council also welcomed the Commission's decision to prolong the work of the Forum for a further two years and agreed on an Accession Convention that will, when ratified, allow the ten new Member States to adhere to the Arbitration Convention.
"I am very pleased that Member States have adopted this Code of Conduct that will improve transfer pricing dispute settlement arrangements so as to ensure the elimination of double taxation of company profits" said Taxation Commissioner László Kovács. "The agreement demonstrates the effectiveness of the EU Joint Transfer Pricing Forum and the Commission has therefore decided that the Forum should continue until the end of 2006".
The Code will ensure a more uniform application by Member States of the EU Arbitration Convention (90/436/EEC) that is designed to resolve double taxation in transfer pricing disputes. Such double taxation arises where, for example, one EU Member State increases the taxable profits of a company from its cross-border intra-group transactions and the other Member State of the associated enterprise does not make a corresponding downward adjustment to the taxable profits of that enterprise. The application of the Code should lead to dispute resolution within a maximum of three years. The Code establishes common procedures concerning, in particular:
The Code also recommends the suspension of tax collection during cross-border dispute resolution procedures and the application of the Code rules by Member States to the dispute settlement provisions in their double taxation treaties with each other.
The Commission will monitor implementation of the Code on the basis of Member States' bi-annual reports and if necessary propose improvements.
The texts of the Code and of the Accession Convention will soon be available on the Europa website at:
For further information on the EU Joint Transfer Pricing Forum see: