1.

A multinational enterprise (MNE) group's standardised and consistent EU TPD consists of two main parts:

The EU TPD should contain enough details to allow the tax administration to make a risk assessment for case selection purposes or at the beginning of a tax audit, ask relevant and precise questions regarding the MNE's transfer pricing and assess the transfer prices of the inter-company transactions. Subject to paragraph 31, the company would produce one single file for each Member State concerned, i.e. one common masterfile to be used in all Member States concerned and a different set of country-specific documentation for each Member State.

2.

Each of the items of the EU TPD listed below should be completed, taking into account the complexity of the enterprise and the transactions. As far as possible, information should be used that is already in existence within the group (e.g. for management purposes). However, an MNE might be required to produce documentation for this purpose that otherwise would not have been in existence.

3.

The EU TPD covers all group entities resident in the EU including controlled transactions between enterprises resident outside the EU and group entities resident in the EU.

4.1.

The masterfile should follow the economic reality of the business and provide a ‘blueprint’ of the MNE group and its transfer pricing system that would be relevant and available to all EU Member States concerned.

4.2.

The masterfile should contain the following items:

5.1.

The content of the country-specific documentation supplements the masterfile. Together the two constitute the documentation file for the relevant EU Member State. The country-specific documentation would be available to those tax administrations with a legitimate interest in the appropriate tax treatment of the transactions covered by the documentation.

5.2.

Country-specific documentation should contain, in addition to the content of the masterfile, the following items:

6.

An MNE should have the possibility of including items in the masterfile instead of the country-specific documentation, keeping, however, the same level of detail as in the country-specific documentation. The country-specific documentation should be prepared in a language prescribed by the Member State concerned, even if the MNE has opted to keep the country-specific documentation in the masterfile.

7.

Any country-specific information and documents that relate to a controlled transaction involving one or more Member States must be contained either in the country-specific documentation of all the Member States concerned or in the common masterfile.

8.

MNEs should be allowed to prepare the country-specific documentation in one set of documentation (containing information about all businesses in that country) or in separate files for each business or group of activities in that country.

9.

The country-specific documentation should be prepared in a language prescribed by the Member State concerned.

10.

Use of the EU TPD is optional for MNE groups. However, an MNE group should not arbitrarily opt in and out of the EU Transfer Pricing Documentation approach for its documentation purposes but should apply the EU TPD in a way that is consistent throughout the EU and from year to year.

11.

An MNE group that opts for the EU TPD should generally apply this approach collectively to all associated enterprises engaged in controlled transactions involving enterprises in the EU to which transfer pricing rules apply. Subject to paragraph 31, an MNE group opting for the EU TPD would, therefore, need to keep the documentation specified in Section 1 in respect of all its enterprises in the Member State concerned, including permanent establishments.

12.

Where an MNE group has opted for the EU TPD for a given fiscal year, each member of the MNE group should inform its tax administration accordingly.

13.

MNEs should undertake to prepare the masterfile in time to comply with any legitimate request originating from one of the tax administrations involved.

14.

The taxpayer in a given Member State should make its EU TPD available, upon request by a tax administration, within a reasonable time depending on the complexity of the transactions.

15.

The taxpayer responsible for making documentation available to the tax administration is the taxpayer that would be required to make the tax return and that would be liable to a penalty if adequate documentation were not made available. This is the case even if the documentation is prepared and stored by one enterprise within a group on behalf of another. The decision of an MNE group to apply the EU TPD implies a commitment towards all associated enterprises in the EU to make the masterfile and the respective country-specific documentation available to its national tax administration.

16.

Where in its tax return, a taxpayer makes an adjustment to its accounts profit resulting from the application of the arm's length principle, documentation demonstrating how the adjustment was calculated should be available.

17.

The aggregation of transactions must be applied consistently, be transparent to the tax administration and be in accordance with paragraph 1.42 of the OECD Transfer Pricing Guidelines (which allow aggregation of transactions that are so closely linked or continuous that they cannot be evaluated adequately on a separate basis). These rules should be applied in a reasonable manner, taking into account in particular the number and complexity of the transactions.

18.

Since the EU TPD is a basic set of information for the assessment of the MNE group's transfer prices a Member State would be entitled in its domestic law to require more and different information and documents, by specific request or during a tax audit, than would be contained in the EU TPD.

19.

The period for providing additional information and documents upon specific request referred to in paragraph 18 should be determined on a case-by-case basis taking into account the amount and detail of the information and documents requested. Depending on specific local regulations, the timing should give the taxpayer a reasonable time (which can vary depending on the complexity of the transaction) to prepare the additional information.

20.

Taxpayers avoid cooperation-related penalties where they have agreed to adopt the EU TPD approach and provide, upon specific request or during a tax audit, in a reasonable manner and within a reasonable time, additional information and documents going beyond the EU TPD referred to in paragraph 18.

21.

Taxpayers should be required to submit their EU TPD, i.e. the masterfile and the country-specific documentation, to the tax administration only at the beginning of a tax audit or upon specific request.

22.

Where a Member State requires a taxpayer to submit information about transfer pricing with its tax return, that information should be no more than a short questionnaire or an appropriate risk assessment form.

23.

It may not always be necessary for documents to be translated into a local language. In order to minimise costs and delays caused by translation, Member States should accept documents in a foreign language as far as possible. As far as the EU Transfer Pricing Documentation is concerned, tax administrations should be prepared to accept the masterfile in a commonly understood language in the Member States concerned. Translations of the masterfile should be made available only if strictly necessary and upon specific request.

24.

Member States should not oblige taxpayers to retain documentation beyond a reasonable period consistent with the requirements of the domestic laws where the taxpayer is liable to tax regardless of where the documentation, or any part of it, is situated.

25.

Member States should evaluate domestic or non-domestic comparables with respect to the specific facts and circumstances of the case. For example, comparables found in pan-European databases should not be rejected automatically. The use of non-domestic comparables by itself should not subject the taxpayer to penalties for non-compliance.

26.

Where documentation produced for one period remains relevant for subsequent periods and continues to provide evidence of arm's length pricing, it may be appropriate for the documentation for subsequent periods to refer to earlier documentation rather than to repeat it.

27.

Documentation does not need to replicate the documentation that might be found in negotiations between enterprises acting at arm's length (for example, in agreeing to a borrowing facility or a large contract) as long as it includes adequate information to assess whether arm's length pricing has been applied.

28.

The sort of documentation that needs to be produced by an enterprise that is a subsidiary enterprise in a group may be different from that needed to be produced by a parent company, i.e. a subsidiary company would not need to produce information about all of the cross-border relationships and transactions between associated enterprises within the MNE group but only about relationships and transactions relevant to the subsidiary in question.

29.

It should be irrelevant for tax administrations where a taxpayer prepares and stores its documentation as long as the documentation is sufficient and made available in a timely manner to the tax administrations involved upon request. Taxpayers should, therefore, be free to keep their documentation, including their EU TPD, either in a centralised or in a decentralised manner.

30.

The way that documentation is stored — whether on paper, in electronic form or in any other way — should be at the discretion of the taxpayer, provided that it can be made available to the tax administration in a reasonable way.

31.

In well justified cases, e.g. where an MNE group has a decentralised organisational, legal or operational structure or consists of several large divisions with completely different product lines and transfer pricing policies or no inter-company transactions, and in the case of a recently acquired enterprise, an MNE group should be allowed to produce more than one masterfile or to exempt specific group members from the EU TPD.

—

an MNE is a company that is part of an MNE group,

—

an MNE group is a group of associated companies with business establishments in two or more countries.

(i)

one uniform set of documentation containing common standardised information relevant for all EU group members (the ‘masterfile’), and

(ii)

several sets of standardised documentation each containing country-specific information (‘country-specific documentation’).