• Type: Publication series
  • Date: 6/3/2014

EU’s Transfer Pricing Forum proposes guidelines on transfer pricing audits 


Teodora Alecu

Director, Transfer Pricing

In April 2013, the OECD’s Global Forum on Transfer Pricing issued a Draft Handbook on Transfer Pricing Risk Assessment, which aims to provide guidance to tax authorities on how to assess transfer pricing risk and how to conduct transfer pricing audits.

The EU Joint Transfer Pricing Forum (“JTPF”) has followed up on the OECD’s initiative and issued general guidelines on conducting a transfer pricing audit in June 2013. The Report on transfer pricing risk management issued by the JTPF offers guidance on how to manage the limited resources that EU member states have to perform transfer pricing audits, considering that this process can be resource consuming for both taxpayers and tax authorities.


Measures to ensure an efficient transfer pricing audit 

The JTPF report suggests a series of measures that can be adopted by the tax authorities of EU member states, to ensure efficient transfer pricing audits. These include:

  • Taxpayers should prepare a transfer pricing documentation file prior to a transfer pricing audit.
  • There should be a cooperative approach by both the tax authorities and taxpayers, based on transparency and communication. The report recommends that taxpayers should be cooperative and disclose the information needed by the tax authorities to perform an in-depth transfer pricing risk assessment with minimum resources.
  • Tax authorities should develop certain criteria to help them point out the main transfer pricing risks and appropriate departments should be established within the tax administration to assess the level of resources which need to be deployed in specific cases.
  • A transfer pricing work plan should be prepared by both taxpayers and tax authorities, setting out various steps that to need be followed during the audit, to serve as a guide for the process.


Transfer pricing audit work plan
The report also makes recommendations for the different phases of a transfer pricing audit, which are summarized in an audit work plan.


The initial phase should take place before the start of the audit. The main objective of this phase is to understand whether it is appropriate to initiate a transfer pricing audit for a certain taxpayer, considering the resources available and the risks identified. During this phase, a request for information should normally be sent by the tax authorities to the taxpayer, followed by a thorough evaluation of the data received, with the aim of determining the level of the transfer pricing risk and whether a further audit should be started.


The audit phase should start with the preparation of an audit work plan. During this phase it is important for the taxpayer and the authorities to establish a mutual understanding of the facts and circumstances of the transactions subject to the transfer pricing audit


The last phase is the resolution, which takes place when it is not possible for the taxpayer and the tax administration to come to an agreement. In this case, the taxpayer can request a mutual agreement procedure (“MAP”) or start litigation. If the dispute cannot be resolved by common agreement, it is important for efficient dispute resolution mechanisms to be in place, such as those provided by the EU Arbitration Convention.


Transfer Pricing audit work plan according to the EU JTPF


It is possible that some of these guidelines on conducting a transfer pricing audit will be implemented into Romanian transfer pricing legislation in the future, considering that the Romanian authorities need to find solutions to resolve the issue of limited resources being available to perform transfer pricing audits.


Share this

Share this