Annexes to COM(2023)529 - Transfer pricing - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2023)529 - Transfer pricing. |
|---|---|
| document | COM(2023)529 |
| date | September 12, 2023 |
3. ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE
3.1. Heading(s) of the multiannual financial framework and expenditure budget line(s) affected
- Existing budget lines
In order of multiannual financial framework headings and budget lines.
| Heading of multiannual financial framework | Budget line | Type of expenditure | Contribution | ||||
| Number 03 04 0100 | Diff./Non-diff.42 | from EFTA countries43 | from candidate countries and potential candidates44 | fromother third countries | other assigned revenue | ||
| Improving the proper functioning of the tax systems | Diff. | NO | NO | NO | NO |
- New budget lines requested
In order of multiannual financial framework headings and budget lines.
| Heading of multiannual financial framework | Budget line | Type of expenditure | Contribution | |||
| Number | Diff./Non-diff. | from EFTA countries | from candidate countries and potential candidates | from other third countries | other assigned revenue | |
| [XX.YY.YY.YY] | Diff. | YES/NO | YES/NO | YES/NO | YES/NO |
3.2. Estimated financial impact of the proposal on appropriations
3.2.1. Summary of estimated impact on operational appropriations
- The proposal/initiative does not require the use of operational appropriations
- The proposal/initiative requires the use of operational appropriations, as explained below:
EUR million (to three decimal places)
| Heading of multiannual financial framework | Number | 03 04 0100 |
| DG: TAXUD | Year 202545 | Year 2026 | Year 2027 | Year | Year | Year | TOTAL | ||
| □ Operational appropriations | |||||||||
| Budget line46 | Commitments | (1a) | 0,065 | 0,065 | 0,065 | 0,195 | |||
| Payments | (2a) | 0,065 | 0,065 | 0,065 | 0,195 | ||||
| Budget line | Commitments | (1b) | |||||||
| Payments | (2b) | ||||||||
| Appropriations of an administrative nature financed from the envelope of specific programmes47 | |||||||||
| Budget line | (3) | ||||||||
| TOTAL appropriations for DG TAXUD | Commitments | =1a+1b +3 | 0,065 | 0,065 | 0,065 | 0,195 | |||
| Payments | =2a+2b +3 | 0,065 | 0,065 | 0,065 | 0,195 |
| □ TOTAL operational appropriations | Commitments | (4) | ||||||||
| Payments | (5) | |||||||||
| □ TOTAL appropriations of an administrative nature financed from the envelope for specific programmes | (6) | |||||||||
| TOTAL appropriations under HEADING <….> of the multiannual financial framework | Commitments | =4+ 6 | ||||||||
| Payments | =5+ 6 |
If more than one operational heading is affected by the proposal / initiative, repeat the section above:
| □ TOTAL operational appropriations (all operational headings) | Commitments | (4) | ||||||||
| Payments | (5) | |||||||||
| TOTAL appropriations of an administrative nature financed from the envelope for specific programmes (all operational headings) | (6) | |||||||||
| TOTAL appropriations under HEADINGS 1 to 6 of the multiannual financial framework (Reference amount) | Commitments | =4+ 6 | ||||||||
| Payments | =5+ 6 |
| Heading of multiannual financial framework | 7 | ‘Administrative expenditure’ |
This section should be filled in using the 'budget data of an administrative nature' to be firstly introduced in the Annex to the Legislative Financial Statement (Annex 5 to the Commission decision on the internal rules for the implementation of the Commission section of the general budget of the European Union), which is uploaded to DECIDE for interservice consultation purposes.
EUR million (to three decimal places)
| Year 2025 | Year 2026 | Year 2027 | Year N+3 | Enter as many years as necessary to show the duration of the impact (see point 1.6) | TOTAL | |||||
| DG TAXUD | ||||||||||
| □ Human resources | 1.026 | 1.026 | 1.026 | 3.078 | ||||||
| □ Other administrative expenditure | 0.052 | 0.052 | 0.52 | 0.156 | ||||||
| TOTAL DG TAXUD | Appropriations | 1.078 | 1.078 | 1.078 | 3.234 |
| TOTAL appropriations under HEADING 7 of the multiannual financial framework | (Total commitments = Total payments) | 1.078 | 1.078 | 1.078 |
EUR million (to three decimal places)
| Year N48 | Year N+1 | Year N+2 | Year N+3 | Enter as many years as necessary to show the duration of the impact (see point 1.6) | TOTAL | ||||
| TOTAL appropriations under HEADINGS 1 to 7 of the multiannual financial framework | Commitments | 1.143 | 1.143 | 1.143 | 3.429 | ||||
| Payments | 0.065 | 0.065 | 0.065 | 0.195 |
3.2.2. Estimated output funded with operational appropriations
Commitment appropriations in EUR million (to three decimal places)
| Indicate objectives and outputs | Year N | Year N+1 | Year N+2 | Year N+3 | Enter as many years as necessary to show the duration of the impact (see point 1.6) | TOTAL | ||||||||||||
| OUTPUTS | ||||||||||||||||||
| Type49 | Average cost | No | Cost | No | Cost | No | Cost | No | Cost | No | Cost | No | Cost | No | Cost | Total No | Total cost | |
| SPECIFIC OBJECTIVE No 150… | ||||||||||||||||||
| - Output | ||||||||||||||||||
| - Output | ||||||||||||||||||
| - Output | ||||||||||||||||||
| Subtotal for specific objective No 1 | ||||||||||||||||||
| SPECIFIC OBJECTIVE No 2 ... | ||||||||||||||||||
| - Output | ||||||||||||||||||
| Subtotal for specific objective No 2 | ||||||||||||||||||
| TOTALS |
3.2.3. Summary of estimated impact on administrative appropriations
- The proposal/initiative does not require the use of appropriations of an administrative nature
- The proposal/initiative requires the use of appropriations of an administrative nature, as explained below:
EUR million (to three decimal places)
| Year 2025 51 | Year 2026 | Year 2027 | Year | Enter as many years as necessary to show the duration of the impact (see point 1.6) | TOTAL |
| HEADING 7 of the multiannual financial framework | ||||||||
| Human resources | 1.026 | 1.026 | 1.026 | 3.078 | ||||
| Other administrative expenditure | 0.052 | 0.052 | 0.052 | 0.156 | ||||
| Subtotal HEADING 7 of the multiannual financial framework | 1.078 | 1.078 | 1.078 | 3.234 |
| Outside HEADING 752 of the multiannual financial framework | ||||||||
| Human resources | ||||||||
| Other expenditure of an administrative nature | ||||||||
| Subtotal outside HEADING 7 of the multiannual financial framework |
| TOTAL | 1.078 | 1.078 | 1.078 | 3.234 |
The appropriations required for human resources and other expenditure of an administrative nature will be met by appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.
3.2.3.1. Estimated requirements of human resources
- The proposal/initiative does not require the use of human resources.
- The proposal/initiative requires the use of human resources, as explained below:
Estimate to be expressed in full time equivalent units
| Year 2025 | Year 2026 | Year 2027 | Year | Year | Year | Total | |||
| □ Establishment plan posts (officials and temporary staff) | |||||||||
| 20 01 02 01 (Headquarters and Commission’s Representation Offices) | 6 | 6 | 6 | 6 | |||||
| 20 01 02 03 (Delegations) | |||||||||
| 01 01 01 01 (Indirect research) | |||||||||
| 01 01 01 11 (Direct research) | |||||||||
| Other budget lines (specify) | |||||||||
| □ External staff (in Full Time Equivalent unit: FTE)53 | |||||||||
| 20 02 01 (AC, END, INT from the ‘global envelope’) | |||||||||
| 20 02 03 (AC, AL, END, INT and JPD in the delegations) | |||||||||
| XX 01 xx yy zz 54 | - at Headquarters | ||||||||
| - in Delegations | |||||||||
| 01 01 01 02 (AC, END, INT - Indirect research) | |||||||||
| 01 01 01 12 (AC, END, INT - Direct research) | |||||||||
| Other budget lines (specify) | |||||||||
| TOTAL | 6 | 6 | 6 | 6 |
The human resources required will be met by staff from the DG who are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.
Description of tasks to be carried out:
| Officials and temporary staff | Preparing of meetings and correspondence with Member States, preparing the implementing acts, organise the meetings with experts, participate in meetings of the OECD. Currently DG TAXUD does not have the necessary resources, thus additional FTEs would need to be added in the future budget of DG TAXUD. |
| External staff |
3.2.4. Compatibility with the current multiannual financial framework
The proposal/initiative:
- can be fully financed through redeployment within the relevant heading of the Multiannual Financial Framework (MFF).
Explain what reprogramming is required, specifying the budget lines concerned and the corresponding amounts. Please provide an excel table in the case of major reprogramming.
- requires use of the unallocated margin under the relevant heading of the MFF and/or use of the special instruments as defined in the MFF Regulation.
Explain what is required, specifying the headings and budget lines concerned, the corresponding amounts, and the instruments proposed to be used.
- requires a revision of the MFF.
Explain what is required, specifying the headings and budget lines concerned and the corresponding amounts.
3.2.5. Third-party contributions
The proposal/initiative:
- does not provide for co-financing by third parties
- provides for the co-financing by third parties estimated below:
Appropriations in EUR million (to three decimal places)
| Year N55 | Year N+1 | Year N+2 | Year N+3 | Enter as many years as necessary to show the duration of the impact (see point 1.6) | Total | |||
| Specify the co-financing body | ||||||||
| TOTAL appropriations co-financed |
3.3. Estimated impact on revenue
- The proposal/initiative has no financial impact on revenue.
- The proposal/initiative has the following financial impact:
- on own resources
- on other revenue
- please indicate, if the revenue is assigned to expenditure lines ◻
EUR million (to three decimal places)
| Budget revenue line: | Appropriations available for the current financial year | Impact of the proposal/initiative56 | ||||||
| Year N | Year N+1 | Year N+2 | Year N+3 | Enter as many years as necessary to show the duration of the impact (see point 1.6) | ||||
| Article …………. |
For assigned revenue, specify the budget expenditure line(s) affected.
Other remarks (e.g. method/formula used for calculating the impact on revenue or any other information).
1See OECD website: https://www.oecd.org/.
2OECD Model Tax Convention on Income and Capital (https://www.oecd.org/ctp/treaties/model-tax-convention-on-income-and-on-capital-condensed-version-20745419.htm).
3OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (https://www.oecd.org/tax/transfer-pricing/oecd-transfer-pricing-guidelines-for-multinational-enterprises-and-tax-administrations-20769717.htm).
4Malta, Cyprus, Bulgaria and Romania are not members of the OECD.
5A large firm also pointed out that tax disputes related to intra-EU transfer pricing and withholding tax elimination increased.
6At 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 could be between USD 100 to 240 billion annually (see https://www.oecd.org/tax/beps-project-explanatory-statement-9789264263437-en.htm); Transfer Pricing manipulation was identified as one of the BEPS practices. In particular, Actions 8-10 of the BEPS project were dedicated to enhancing the guidance on the arm’s length principle to ensure that what dictates results is the economic rather than the paper reality. In this regard, the final report of Actions 8-10 seeks to align transfer-pricing outcomes with the value creation of the MNE group.
7The OECD official statistics show that at the end of 2021 the number the pending Mutual agreement procedures (MAPs) activated to resolve double taxation arising from Transfer Pricing cases has increased by 33% compared to the 2016 (the MAP inventory at the end 2021 results were 6000 against the 4500 pending MAP cases at the end of 2016). OECD MAP statistics are available at: https://www.oecd.org/tax/dispute/mutual-agreement-procedure-statistics-2021-inventory-trends.htm#tpcases. The EU official statistics on MAPs under the Arbitration Convention show an increase of transfer pricing disputes between Member States of 17% compared to the previous year (tot MAP inventory of Member States at the end of 2020 was 2213 while total MAP inventory of the Member States at the end of 2019 was 1889). EU MAP statistics are available here: https://taxation-customs.ec.europa.eu/taxation-1/statistics-apas-and-maps-eu_en.
8According to a survey on transfer pricing published by Ernst & Young (and available at http://www.ey.com/global/content.nsf/International/2007-2008_Transfer_Pricing_Global_Survey), one of the reasons why business considers transfer pricing a priority tax issue is indeed its connection with double taxation. According to the survey (interviews with 850 multinational companies across 24 countries (of which 11 EU Member States) were conducted), business have reported that 42% of cases of adjustment gave rise to a permanent double taxation. This is primarily because firms do not generally refer cases to mutual agreement procedures, as they consider the procedures too lengthy and costly.
9According to the Company Tax Study conducted by the European Commission in 2001 (Taxation in the Single Market’. SEC (2001) 582 final) Medium-sized multinational enterprises are reported to spend approximately EUR 1 million to EUR 2 million a year on complying with transfer pricing rules. Large multinational enterprises incur compliance costs related to transfer pricing of approximately EUR 4 million to EUR 5.5 million a year.
10Communication on Business Taxation for the 21st Century see: https://taxation-customs.ec.europa.eu/communication-business-taxation-21st-century_en.
11Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32016L1164).
12Council Directive (EU) 2017/952 of 29 May 2017 amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32017L0952).
13Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (https://eur-lex.europa.eu/legal-content/en/ALL/?uri=CELEX%3A32011L0016).
14Council Directive (EU) 2015/2376 of 8 December 2015 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (https://eur-lex.europa.eu/legal-content/en/ALL/?uri=CELEX%3A32015L2376).
15Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32018L0822).
16An APA refers to any agreement, communication or any other instrument or action with similar effects, determining in advance, an appropriate set of criteria for establishing the transfer price of cross-border transactions between associated enterprises or the attribution of profits to a permanent establishment.
17See EU Joint Transfer Pricing Forum (JTPF) here: https://taxation-customs.ec.europa.eu/joint-transfer-pricing-forum_en.
18Resolution 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_.2006.176.01.0001.01.ENG&toc=OJ%3AC%3A2006%3A176%3AFULL
19Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (90/463/EEC).
20Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union (https://eur-lex.europa.eu/legal-content/en/ALL/?uri=CELEX%3A32017L1852).
21See ETACA website here: https://taxation-customs.ec.europa.eu/eu-cooperative-compliance-programme/european-trust-and-cooperation-approach-etaca-pilot-project-mnes_en.
22Regulation (EU) 2021/240 of the European Parliament and of the Council of 10 February 2021 establishing a Technical Support Instrument, OJ L 57, 18.2.2021, p. 1.
23See Taxation and SMEs Website: https://single-market-economy.ec.europa.eu/smes/sme-strategy/taxation-and-smes_en.
24Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation).
25EU Joint Transfer Pricing Forum Report on compensating adjustments (JTPF/009/FINAL/2013/EN): https://taxation-customs.ec.europa.eu/system/files/2016-09/jtpf_009_final_2013_en.pdf.
26EU Joint Transfer Pricing Forum Report on the use of economic valuation techniques in transfer pricing (JTPF/003/2017/FINAL/EN): https://taxation-customs.ec.europa.eu/system/files/2017-10/2017_10_16_jtpf_003_2017_en_final_en.pdf.
27EU Joint Transfer Pricing Forum Report on the use of comparables in the EU (JTPF/007/2016/FINAL/EN): https://taxation-customs.ec.europa.eu/system/files/2017-04/jtpf0072017encomps.pdf.
28OJ C , , p. .
29OJ C , , p. .
30JTPF/009/FINAL/2013/EN, Meeting of 5 November 2013: https://taxation-customs.ec.europa.eu/system/files/2016-09/jtpf_009_final_2013_en.pdf
31JTPF/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_en.pdf
32Commission’s 2016 EU Joint Transfer Pricing Forum Report on the use of comparables in the EU (JTPF/007/2016/FINAL/EN):https://taxation-customs.ec.europa.eu/system/files/2017-04/jtpf0072017encomps.pdf
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_.2006.176.01.0001.01.ENG&toc=OJ%3AC%3A2006%3A176%3AFULL
34 Regulation (EU) 2018/1724 of the European Parliament and of the Council of 2 October 2018 establishing a single digital gateway to provide access to information, to procedures and to assistance and problem-solving services and amending Regulation (EU) No 1024/2012 (OJ L 295, 21.11.2018, p. 1).
35Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1).
36Convention 90/463/EEC of 23 July 1990 on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (OJ L 225, 20.8.1990, p. 10).
37Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union (OJ L 265, 14.10.2017, p. 1).
38Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011
laying down the rules and general principles concerning mechanisms for control by Member States of
the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13–18)
39As referred to in Article 58(2)(a) or (b) of the Financial Regulation.
40See EU Joint Transfer Pricing Forum (JTPF) here: https://taxation-customs.ec.europa.eu/joint-transfer-pricing-forum_en.
41Details of budget implementation methods and references to the Financial Regulation may be found on the BUDGpedia site: https://myintracomm.ec.europa.eu/corp/budget/financial-rules/budget-implementation/Pages/implementation-methods.aspx
42Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations.
43EFTA: European Free Trade Association.
44Candidate countries and, where applicable, potential candidates from the Western Balkans.
45Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same for the following years.
46According to the official budget nomenclature.
47Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research.
48Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same for the following years.
49Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.).
50As described in point 1.4.2. ‘Specific objective(s)…’
51Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same for the following years.
52Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research.
53AC= Contract Staff; AL = Local Staff; END= Seconded National Expert; INT = agency staff; JPD= Junior Professionals in Delegations.
54Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines).
55Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same for the following years.
56As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net amounts, i.e. gross amounts after deduction of 20 % for collection costs.
EN EN