The new transfer pricing rules (i.e. TP) recommended by the OECD and implemented by the States and the EU without creating a revolution in the principles have generated a real upheaval in the intragroup relations approach. When you are in control, the administration leaves you little time to respond and demonstrate your compliance. There are methods of prevention but often not used by the taxpayer. You may not have an “Advanced Pricing Agreement” (APA) in place to determine the "at arm's length" pricing methodology. You will have forgotten to use the rules of "Safe Harbor". You will not have ICAP ("International Compliance Assurance Program" - 2.0) previously negotiated. Preventive dispute resolution measures exist, but still need to be resorted to.
Otherwise, when the questions come up, it may be too late. Tax authorities talk to each other and cooperate. The taxpayer engages the dialogue with several tax authorities. This is a kind of preventive ruling to prevent litigation. There have been some cases that have made the headlines such as Glencore in Australia, Google in France, FIAT in Luxembourg or Microsoft in Denmark. This is a kind of wave of litigations that could give the tax authorities an appetite for more. These Court decisions demonstrate that we have entered a new era and that in transfer pricing, things will not be the same as before. We will have to be prepared to prevent risks. A Directive 2017/1852 considers the cases of dispute resolutions concerning taxes. This Directive has been transposed into national law, including Luxembourg law. It came into force on July 1, 2019, with respect to the fiscal years beginning January 1, 2018. What measures have been implemented to resolve these potential disputes? There is for example the “Mutal Agreement Procedure” (MAP).
In case of dispute and litigation, what can be done? Resolve to pay? Fight for the respect of his rights? Let experts decide? or Go beyond the law and be illegal? One can converse and discuss with the tax administration, go to Court and deal with the dispute, establish a mutual agreement (i.e. MAP) with the relevant authorities or resort to arbitration by a Commission.
Cases of litigation are gradually increasing; it is an undeniable fact. One may fear that this is only the beginning of a new era. It is therefore better to prepare the documentation carefully, to compile the evidence that will attest to the correctness of transfer prices. "One is never sufficiently prepared for all impossibilities" (Dr. M).