TRANSFER PRICE REGULATIONS BETWEEN THEORY AND PRACTICE

Abstract

In the actual economical context, the transfer prices are a major preoccupation for both multinationals and fiscal authorities. Because nowadays almost 60% from the world wide commerce is represented by transactions between multinationals, the national fiscal authorities are very careful when taking into account the tax levels paid by these companies in each jurisdiction the scope being avoiding the artificial profit transfer though transactions between affiliated persons. National fiscal authorities are trying to make sure that companies are respecting in intra-group transactions the Arm’s Length Principle as defined by OECD. In this context, the multinationals have to prove that the transfer prices used in transactions are reflecting the market prices. From the taxpayer point of view the transfer prices are a major preoccupation for multinationals both for avoiding fiscal risks (double taxation risk) and for fiscal planning (in order to avoid a fiscal adjustment for prices used in transactions). In the present paper we will present the importance of establishing the transfer prices according to the pure competition principle, methods for establishing the transfer prices and the European Union tendencies regarding the transfer pricesArm’s length Principle, cross-border transactions, multinational companies, transfer prices.