Press Release: Company taxation: Commission welcomes adoption of Code of Conduct to eliminate double taxation in cross-border transfer pricing cases

The European Commission on welcomed the adoption on 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, 7 December 2004. The Code was thought to 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.