BETA

47 Amendments of Manon AUBRY related to 2023/0322(CNS)

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Recital 3

(3) Where Member States apply or interpret the arm’s length principle differently, they create situations that could ~~harm the internal market~~result 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 border~~threat to tax revenues, is likely to cause economic distortions and inefficiencies and has a negative impact on cross-border ~~investment and growth~~productive investment.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Recital 6

(6) To ensure the mitigation of double taxation, Member States should have adequate mechanisms in place to enable them, when a primary adjustment is made in another Member State or third country jurisdiction, to make a corresponding adjustment. In particular, Member States should have the possibility to perform corresponding adjustments and should not limit the granting of such an adjustment in the context of mutual agreement procedures (MAPs) but also as a result of: (i) a “fast-track” procedure to be concluded in 180 days without the need to open a MAP when there is no doubt that the primary adjustment is well founded; or (ii) joint audits or other forms of international cooperation such as multilateral risk assessment programs like the European Trust and Cooperation Approach (ETACA) and the International Compliance Assurance Programme (ICAP).deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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~~.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Recital 16

(16) In order to create more certainty for taxpayers and mitigate the risk of double taxation, the possibility to establish further common transfer pricing binding rules by way of implementing acts is provided in this Directive. Those implementing acts should provide taxpayers with a clear view of what tax authorities in the Union would consider to be acceptable to be used for specified transactions and provide so-called ‘safe harbours’ that bring down the compliance burden and the number of disputes. In view of the potential impact of such measures on national executive and enforcement power regarding direct taxation, the exercising of taxing rights allocated under bilateral or multilateral tax conventions that prevent double taxation or double non-taxation and in view of potential impact on Member States’ tax bases, implementing powers to adopt decisions under this Directive should be conferred on the Council, acting on a proposal from the Commission.deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 3 – paragraph 1 – point 9

(9) ‘comparable uncontrolled price method’ means a transfer pricing method that compares the price for property or services transferred in a controlled transaction to the price charged for property or services transferred in a comparable uncontrolled transaction in comparable circumstances;deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 3 – paragraph 1 – point 10

(10) ‘resale price method’ means a transfer pricing method based on the price at which a product that has been purchased from an associated enterprise is resold to an independent enterprise; the resale price being reduced by the resale price margin and the result, after subtracting the resale price margin, can be regarded, after adjustment for other costs associated with the purchase of the product, e.g. custom duties, as an arm’s length price of the original transfer of property between the associated enterprises;deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 3 – paragraph 1 – point 11

(11) ‘cost plus method’ means a transfer pricing method using the costs incurred by the supplier of property (or services) in a controlled transaction; an appropriate mark-up is added to these costs, to make an appropriate profit in light of the functions performed (taking into account assets used and risks assumed) and the market conditions; the price, after adding the mark-up to the proper cost base, may be regarded as an arm’s length price of the original controlled transaction;deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 3 – paragraph 1 – point 12

(12) ‘transactional net margin method’ means a transactional profit method that examines the net profit margin relative to an appropriate base, e.g. costs, sales, assets, that a taxpayer realises from a controlled transaction that it is appropriate to aggregate;deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 3 – paragraph 1 – point 13

(13) ‘profit split method’ means a transactional profit split method that shows the relevant profits to be split for the associated enterprises from a controlled transaction (or controlled transactions that it is appropriate to aggregate) and then divides those profits between the associated enterprises on an economically valid basis that approximates the division of profits that would have been agreed at arm’s length;deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 5 – paragraph 1 – point a

(a) a person participates in the management of another person by being in a position to exercise a ~~significant~~n influence over ethe other person;

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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;

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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;

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 5 – paragraph 1 – point d

(d) a person is entitled to 25 % or more of the profits of another person.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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 ~~tax~~a minimum effective level of taxation in line with the Directive (EU) 2022/2523 in such Member State;

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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 ~~may~~should be rejected as inadmissible.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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;

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 7 – paragraph 1 – point a

(a) before recording the relevant transaction, or series of transactions, the taxpayer made ~~reasonable efforts~~everything possible to achieve an arm's length outcome;

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 9

1. Member States shall ensure that the arm's length price charged in a controlled transaction between associated enterprises is determined using one of the following transfer pricing methods: (a) the comparable uncontrolled price method; (b) the resale price method; (c) the cost-plus method; (d) the transactional net margin method; (e) the profit split method. 2. In addition to those methods listed in paragraph 1, Member States shall allow for the application of any other valuation methods and techniques to estimate the arm’s length price only if it can be demonstrated in a satisfactory manner that: (a) none of the methods referred to in paragraph 1 is appropriate or workable in the circumstances of the case; (b) the selected valuation method or technique is consistent with the arm’s length principle and provides a more reliable estimate of the arm’s length result than the methods listed in paragraph 1.Article 9 deleted Transfer pricing methods

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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 9~~OECD Transfer Pricing Guideline, taking into consideration the following criteria:

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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~~;

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 11 – paragraph 2 – point b

(b) the functions performed by each of the parties to the transaction, taking into account assets used and risks assumed, including how those functions relate to the wider generation of value by the MNE group to which the parties belong, the circumstances surrounding the transaction, and industry practices;deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 11 – paragraph 2 – point e

~~(e) the business strategies pursued by the parties.~~deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 12

Determination of the arm’s length range 1. Member States shall ensure that, when the application of the transfer pricing methods produces a range of values, the arm's length range is determined using the interquartile range of the results of the uncontrolled comparables. 2. The interquartile range is the range from the 25th to the 75th percentile of the results derived from the uncontrolled comparables. 3. Member States shall ensure that a taxpayer is not subject to adjustment if its results fall within the arm’s length range, unless it is proven that a specific different positioning in the range is justified by the facts and circumstances of the specific case. 4. Member Stats shall ensure that, if the results of a controlled transaction fall outside the arm's length range, an adjustment is made to the median of all the results unless it is proven that any other point of the range determines an arm’s length price taking into consideration the circumstances of the specific case. The median is the 50th percentile of the range of results of the comparable uncontrolled transactions.Article 12 deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 14 – paragraph 2 – point a

~~(a) transfer of intangibles asset or rights in intangible assets between associated enterprises, including hard-to- value intangibles;~~deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 14 – paragraph 2 – point b

~~(b) the provision of services between associated enterprises, including the provision of marketing and distribution services;~~deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 14 – paragraph 2 – point c

~~(c) cost contribution arrangements between associated enterprises;~~deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 14 – paragraph 2 – point d

~~(d) transactions between associated enterprises in the context of business restructurings;~~deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 14 – paragraph 2 – point e

~~(e) financial transactions;~~deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 14 – paragraph 2 – point f

~~(f) dealings between the head office and its permanent establishments.~~deleted

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
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.

2023/12/18
Committee: ECON

José GUSMÃO, Manon AUBRY

Proposal for a directive
Article 20 – paragraph 1 – subparagraph 2

They shall apply those provisions from [1 January 20265].

2023/12/18
Committee: ECON