Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis (Jan 2011)
Revised OECD Transfer pricing Guidelines and the Czech tax policy
Abstract
In applying the international principles to the taxation of Multinational Enterprises, one of the most difficult issues that have arisen is the establishment for tax purposes of appropriate transfer prices. Transfer prices are significant for both taxpayers and tax administrations because they determine in large part the income and expenses, and therefore taxable profits, of associated enterprises in different tax jurisdictions. The Committee on Fiscal Affairs, which is the main tax policy body of the OECD, has issued a number of reports relating to the transfer pricing issues. The most important are the Transfer pricing Guidelines for multinational enterprises and tax authorities which was published in 1995. These Guidelines focus on the application of the arm’s length principle to evaluate the transfer pricing of associated enterprises, the analysis of the methods for evaluating whether the conditions of commercial and financial relations within Multinational Enterprises satisfy the arm’s length principle and discussion of the practical application of those methods. Simply, these Guidelines focus on the main issues of principle that arise in the transfer pricing area. The Committee on Fiscal Affairs continues its work in this area, on 22 July 2010 approved and released the proposed revisions to Chaps. I through III of these Guidelines and simultaneously published a new Chap. IX related to business restructuring. The revisions are the result of several years of work on comparability and the use of profit-based methods. The revised text will have a significant impact on the application of transfer pricing analysis and transfer pricing methods. The paper is focused on significant changes of newly approved Guidelines with aim to evaluate how the Czech Republic began applying the principles set out in the revised text of these Guidelines.
Keywords
