Activities of José GUSMÃO related to 2023/0322(CNS)
Shadow reports (1)
REPORT on the proposal for a Council directive on transfer pricing
Amendments (47)
Amendment 47 #
Proposal for a directive
Recital 2 a (new)
Recital 2 a (new)
(2 a) However, the “arm’s length principle” is based on the wrong assumption that MNE groups work as a collection of separate entities. This premise fails to acknowledge the global action of MNEs and how they benefit from their market power and economies of scale. Transfer pricing, thus, fails to respond to this reality and it is often used by MNEs to engage in profit-shifting. Artificially high prices for intra-group transactions allow to transfer profits from high to low-tax jurisdictions, reducing the total amount of taxes paid.
Amendment 48 #
Proposal for a directive
Recital 2 b (new)
Recital 2 b (new)
(2 b) At the beginning of the BEPS project in 2013, OECD estimates, while acknowledging the methodological and data limitations, that the scale of global corporate income tax revenue losses due to BEPS practices (including transfer pricing manipulation) could be between USD 100 to 240 billion annually1a.The goal of this Directive is to collect at least part of this amount. _________________ 1a https://www.oecd.org/tax/beps-project- explanatory-statement-9789264263437- en.htm
Amendment 49 #
Proposal for a directive
Recital 2 c (new)
Recital 2 c (new)
(2 c) The long-term solution to effectively address tax avoidance and guarantee a minimum level of effective taxation for MNE groups is a system of unitary taxation with formulary apportionment based on relevant factors to assess where economic activity is taking place. The main purpose of the directive ‘Business in Europe: Framework for Income Taxation’ (BEFIT) should be to create a consolidated tax base for economic groups, as well as implementing such a system.
Amendment 53 #
Proposal for a directive
Recital 3
Recital 3
(3) Where Member States apply or interpret the arm’s length principle differently, they create situations that could harm the internal marketresult in harmful tax practices and losses of tax revenues for Member States. Inconsistency in applicable transfer pricing rules not only could lead to double taxation, but also allow for profit shifting and, tax avoidance and double non-taxation. Such inconsistency is a serious tax obstacle for businesses operating across borderthreat to tax revenues, is likely to cause economic distortions and inefficiencies and has a negative impact on cross-border investment and growthproductive investment.
Amendment 62 #
Proposal for a directive
Recital 5
Recital 5
(5) To ensure that the arm’s length principle is applied in a uniform way across the Union, Member States should apply a common and conservative definition of associated enterprises. In order to ensure equal treatment, a permanent establishment should be treated, for the purpose of this Directive, as an associated enterprise and thus the internal dealings between head office and permanent establishment should be determined in accordance with the arm’s length principle.
Amendment 63 #
Proposal for a directive
Recital 6
Recital 6
Amendment 67 #
Proposal for a directive
Recital 7
Recital 7
(7) There may be legitimate reasons as to why a corresponding adjustment is not given or is less than the primary adjustment. In particular, Member States should not grant corresponding adjustments if: (i) the primary adjustment is not considered to be consistent with the arm’s length principle; (ii) the primary adjustment does not result in the taxation of an amount of profits in another jurisdiction on which the associated enterprise in the relevant Member State has already been subject to tax; and (iii) when a third country jurisdiction is involved, there is no tax treaty in place. In the absence of a primary adjustment, Member States may perform a downward adjustment only if: (i) the downward adjustment is consistent with the arm’s length principle: and not leading to double non-taxation; (ii) an amount equal to the downward adjustment is included in the profit of the associated enterprise in the other jurisdiction and therein subject to tax: and (iii) a communication on the intention to perform a downward adjustment has been sent to the relevant jurisdiction. The aim of the previous provisions is to ensure that: (i) Member States can preserve the right to assess whether the primary adjustment is at arm’s length; and (ii) there is neither double taxation nor double non- taxation. Member States should not create situations of double non-taxation.
Amendment 70 #
Proposal for a directive
Recital 10
Recital 10
(10) Transfer pricing methods are used to establish the arm’s length prices for transactions between associated enterprises. The methods listed in this Directive are in line with Chapter III of the Organisation for Economic Co- operation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022 (‘OECD Transfer Pricing Guidelines’). This Directive does not have a preference for any of these recognised transfer pricing methods. Instead, the most appropriate method rule provided for in this Directive should be applied and thus the most appropriate method should be chosen taking into consideration the facts and circumstances of the specific case. This Directive further provides that a transfer pricing method other than the OECD recognised methods may be applied only where it can be demonstrated that: (i) none of the OECD recognised methods can be reasonably applied to determine arm’s length conditions for the controlled transaction (i.e. the transaction between associated enterprises); and (ii) such other method produces a result consistent with the result which would be achieved by independent enterprises engaging in comparable uncontrolled transactions under comparable circumstances. The taxpayer, or the tax administration, that uses a method other than one of the OECD recognised methods should bear the burden of demonstrating that the requirements have been satisfied. When the conditions are fulfilled and an economic valuation technique is applied to identify an arm's length price, the content and recommendations of the Commission’s 2017 EU Joint Transfer Pricing Forum Report on the use of economic valuation techniques in transfer pricing31 should be taken into due consideration. _________________ 31 JTPF/003/2017/FINAL/EN, Meeting of 22 June 2017: https://taxation- customs.ec.europa.eu/system/files/2017- 10/2017_10_16_jtpf_003_2017_en_final_e n.pdfe OECD Transfer Pricing Guidelines.
Amendment 73 #
Proposal for a directive
Recital 11
Recital 11
(11) The selection of the transfer pricing method should always aim at finding the most appropriate method for a particular case. The selection process of the most appropriate transfer pricing method should take account of (i) the respective strengths and weaknesses of the transfer pricing methods; (ii) the appropriateness of the method considered in view of the nature of the controlled transaction, determined in particular through a functional analysis; (iii) the availability of reliable information (in particular on uncontrolled comparables) needed to apply the selected method or other methods; and (iv) the degree of comparability between controlled and uncontrolled transactions, including the reliability of comparability adjustments that may be needed to eliminate material differences between them. No one method is suitable in every possible situation, nor is it necessary to prove that a particular method is not suitable in a given set of circumstances. It should be noted that one-sided methods such as Resale Price, Cost Plus, Transactional Net Margin Method are not considered reliable if each party to a transaction makes unique and valuable contributions in relation to the controlled transaction, or where the parties engage in highly integrated activities. In such a case, the profit split method is the most appropriate method, since independent parties might effectively price the transaction in proportion to their respective contributions, in which case a two-sided method would be more appropriate. One- sided methods are appropriate where one of the parties makes all of the unique and valuable contributions involved in the controlled transaction, while the other party does not make any unique and valuable contribution. In such a case, the tested party, that is, the party to the controlled transaction for which a financial indicator is tested, should be the one to which a transfer pricing method can be applied in the most reliable manner and for which the most reliable comparables can be found. The party that does not make any unique and valuable contributions in relation to the transaction will most often be the one to which a one-sided transfer pricing method can be applied most reliably.
Amendment 76 #
Proposal for a directive
Recital 13
Recital 13
(13) In order to minimise disputes and ensure a common approach across the Union, this Directive further provides that a taxpayer should not be subject to adjustment when its results fall within the interquartile range unless the tax administration or the taxpayer proves that a specific different positioning in the range is justified by the facts and circumstances of the specific case. When the results of a controlled transaction fall outside the arm's length range, tax administrations should be required to make an adjustment to the median of all the results unless the taxpayer or the tax administration proves that any other point of the range determines a more reliable arm’s length price in a given case.
Amendment 81 #
Proposal for a directive
Recital 14
Recital 14
(14) In order to lower the compliance burden for taxpayers that operate cross- border within the Union, as well as to address the risk of tax avoidance, a common approach towards the documentation on transfer pricing should further be introduced. One standard template, rules on content and linguistic arrangements, timeframes and which taxpayers should be in scope would bring simplicity and potential cost savings taking into account chapter V ‘Documentation’ of the OECD Transfer Pricing Guidelines and the Code of conduct on transfer pricing documentation for associated enterprises in the European Union33 . _________________ 33 Resolution of the Council and of the representatives of the governments of the Member States, meeting within the Council, of 27 June 2006 on a code of conduct on transfer pricing documentation for associated enterprises in the European Union (EU TPD), 2006/C 176/01, https://eur-lex.europa.eu/legal- content/EN/TXT/?uri=uriserv%3AOJ.C_.2 006.176.01.0001.01.ENG&toc=OJ%3AC %3A2006%3A176%3AFULL
Amendment 86 #
Proposal for a directive
Recital 16
Recital 16
Amendment 94 #
Proposal for a directive
Recital 17 a (new)
Recital 17 a (new)
(17 a) This Directive should cease to apply as of 2030 for groups that fall under the scope of the proposal for a Council Directive on Business in Europe: Framework for Income Taxation (BEFIT), except for the transactions with associated enterprises in third countries, when a formulary apportionment based on relevant factors should be in place, and respecting the criteria laid down in article 19a of the present directive.
Amendment 99 #
Proposal for a directive
Recital 21
Recital 21
(21) In order to lower the administrative burden for taxpayers and the risk of tax avoidance, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of the transfer pricing documentation, by laying down common templates, setting linguistic requirements, defining the type of taxpayer to abide by these templates and the timeframes to be covered. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.
Amendment 107 #
Proposal for a directive
Article 3 – paragraph 1 – point 9
Article 3 – paragraph 1 – point 9
Amendment 108 #
Proposal for a directive
Article 3 – paragraph 1 – point 10
Article 3 – paragraph 1 – point 10
Amendment 109 #
Proposal for a directive
Article 3 – paragraph 1 – point 11
Article 3 – paragraph 1 – point 11
Amendment 110 #
Proposal for a directive
Article 3 – paragraph 1 – point 12
Article 3 – paragraph 1 – point 12
Amendment 111 #
Proposal for a directive
Article 3 – paragraph 1 – point 13
Article 3 – paragraph 1 – point 13
Amendment 117 #
Proposal for a directive
Article 5 – paragraph 1 – point a
Article 5 – paragraph 1 – point a
(a) a person participates in the management of another person by being in a position to exercise a significantn influence over ethe other person;
Amendment 120 #
Proposal for a directive
Article 5 – paragraph 1 – point b
Article 5 – paragraph 1 – point b
(b) a person participates in the control of another person through a holding that exceeds 25 % of the voting rights;
Amendment 122 #
Proposal for a directive
Article 5 – paragraph 1 – point c
Article 5 – paragraph 1 – point c
(c) a person participates in the capital of another person through a right of ownership that, directly or indirectly, exceeds 25 % of the capital;
Amendment 126 #
Proposal for a directive
Article 5 – paragraph 1 – point d
Article 5 – paragraph 1 – point d
(d) a person is entitled to 25 % or more of the profits of another person.
Amendment 127 #
Proposal for a directive
Article 6 – paragraph 1 – point b
Article 6 – paragraph 1 – point b
(b) the primary adjustment results in the taxation of an amount of profits in another jurisdiction on which the associated enterprise in the Member State that was requested to perform the corresponding adjustment has already been subject to taxa minimum effective level of taxation in line with the Directive (EU) 2022/2523 in such Member State;
Amendment 130 #
Proposal for a directive
Article 6 – paragraph 3 – point b
Article 6 – paragraph 3 – point b
(b) Member States shall declare the request admissible within 30 days by virtue of a notification to the taxpayer if all the information provided in paragraph 3, point (a), has been submitted. In the same timeframe, Member States shall notify the taxpayer of the lack of any necessary information and grant at least 30 days to provide it. If the taxpayer does not provide the requested information within the assigned deadline, the request mayshould be rejected as inadmissible.
Amendment 139 #
Proposal for a directive
Article 6 – paragraph 5 – point a a (new)
Article 6 – paragraph 5 – point a a (new)
(a a) the downward adjustment is not leading to double non-taxation and the Member State performing it can attest it is included in the taxable profits of the associated enterprise in the other jurisdiction;
Amendment 140 #
Proposal for a directive
Article 7 – paragraph 1 – point a
Article 7 – paragraph 1 – point a
(a) before recording the relevant transaction, or series of transactions, the taxpayer made reasonable effortseverything possible to achieve an arm's length outcome;
Amendment 141 #
Proposal for a directive
Article 9
Article 9
Amendment 149 #
Proposal for a directive
Article 10 – paragraph 2 – introductory part
Article 10 – paragraph 2 – introductory part
2. The most appropriate transfer pricing method shall be selected from among the transfer pricing methods set out in Article 9OECD Transfer Pricing Guideline, taking into consideration the following criteria:
Amendment 150 #
Proposal for a directive
Article 10 – paragraph 2 – point b
Article 10 – paragraph 2 – point b
(b) the appropriateness of a transfer pricing method in view of the nature of the controlled transaction, determined in particular through an analysis of the functions undertaken by each enterprise in the controlled transaction, taking into account assets used and risks assumed;
Amendment 151 #
Proposal for a directive
Article 11 – paragraph 2 – point b
Article 11 – paragraph 2 – point b
Amendment 152 #
Proposal for a directive
Article 11 – paragraph 2 – point e
Article 11 – paragraph 2 – point e
Amendment 154 #
Proposal for a directive
Article 12
Article 12
Amendment 163 #
Proposal for a directive
Article 14 – paragraph 2 – introductory part
Article 14 – paragraph 2 – introductory part
2. The Council may lay down further rules, consistent with the OECD Transfer Pricing Guidelines, on how the arm’s length principle and the other provisions laid down in Chapter II of this Directive are to be applied in specific transactions to ensure more tax certainty and mitigate the risk of double non-taxation. Those specific transactions or dealing and double taxation, as well as are the following:ducing tax disputes.
Amendment 165 #
Proposal for a directive
Article 14 – paragraph 2 – point a
Article 14 – paragraph 2 – point a
Amendment 168 #
Proposal for a directive
Article 14 – paragraph 2 – point b
Article 14 – paragraph 2 – point b
Amendment 169 #
Proposal for a directive
Article 14 – paragraph 2 – point c
Article 14 – paragraph 2 – point c
Amendment 172 #
Proposal for a directive
Article 14 – paragraph 2 – point d
Article 14 – paragraph 2 – point d
Amendment 174 #
Proposal for a directive
Article 14 – paragraph 2 – point e
Article 14 – paragraph 2 – point e
Amendment 176 #
Proposal for a directive
Article 14 – paragraph 2 – point f
Article 14 – paragraph 2 – point f
Amendment 179 #
Proposal for a directive
Article 14 – paragraph 3
Article 14 – paragraph 3
3. The rules referred to in paragraphs 2 shall be taken by means of Council implementing acts based on a proposal from the Commission and until the period laid down in article 19a.
Amendment 188 #
Proposal for a directive
Article 15 – paragraph 1
Article 15 – paragraph 1
1. The Commission shall examine and evaluate the application of this Directive every 52 years and submit a report on its evaluation to the European Parliament and to the Council. The first report shall be submitted by 31 December 203128.
Amendment 192 #
Proposal for a directive
Article 15 – paragraph 2
Article 15 – paragraph 2
2. Member States shall communicate to the Commission relevant information for the evaluation of this Directive with a view to improving the application of the arm’s length principle, to reducing double non- taxation and double taxation, as well as to combatting tax abuse, in accordance with paragraph 3.
Amendment 198 #
Proposal for a directive
Article 18 – paragraph 2
Article 18 – paragraph 2
2. The delegation of power referred to in Article 13 may be revoked at any time by the Council and the European Parliament. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of the delegated act if already in force.
Amendment 202 #
Proposal for a directive
Article 19 a (new)
Article 19 a (new)
Article 19a Sunset Clause 1. This Directive shall cease to apply as of 1 January 2030 for groups that fall under the scope of the proposal for a Council Directive on Business in Europe: Framework for Income Taxation (BEFIT), except for the transactions with associated enterprises in third countries. 2. Paragraph 1 shall apply only if the proposal for a Council Directive on Business in Europe: Framework for Income Taxation (BEFIT) enters into force before 2030 and if it encompasses the following criteria: (a) accommodates a formulary apportionment based on relevant factors to assess where the economic activity is taking place; (b) does not allow for base erosion practices to take place; (c) covers a sufficiently broad definition of MNE group.
Amendment 204 #
Proposal for a directive
Article 20 – paragraph 1 – subparagraph 1
Article 20 – paragraph 1 – subparagraph 1
Member States shall adopt and publish, by [31 December 20254]at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.
Amendment 206 #
Proposal for a directive
Article 20 – paragraph 1 – subparagraph 2
Article 20 – paragraph 1 – subparagraph 2
They shall apply those provisions from [1 January 20265].