Transfer Pricing and EU Fundamental Freedoms

Abstract:

In this article, the author analyses the relation between national transfer pricing rules and the European Union (EU) fundamental freedoms. The article focuses on the discrimination/restriction analysis and the justification test. It is shown that the European Court of Justice (ECJ's) judgment in Société de Gestion Industrielle (SGI) is not the end of the discussion, but that discriminating national transfer pricing rules applying the arm's length principle have to fulfil several legal requirements in order to be justified. In this regard, a closer look is taken at the tax avoidance and balanced allocation justifications and the requirements set out by ECJ case law with regard to the proportionality test. In addition, it is shown that fiscal cohesion might become another ground for justifying arm's length profit adjustments.

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