4. The main objective of this third communication is therefore to prevent transfer pricing and related double taxation disputes by introducing guidelines for advance pricing agreements (`APA`) within the EU. APAs are agreements between the tax administrations of the relevant EU Member States, which define how future transactions between related tax payers based in two or more Member States will be taxed. The guidelines are based on the best practices identified by the GFB. In principle, any transfer pricing against internationally related parties can be covered by an APA. The details of the specific case are usually discussed at the pre-notification meeting. 89. These agreements should give a guarantee to the parties to the APA and meet the corresponding conditions of the APA, transaction transfer prices are set as in the APA and the transactions are not interpreted differently by the tax authorities. Tax administrations should ensure that they are able to implement this security. 141.

Agreement on documents to be kept in the APA report to allow for monitoring, for example. B an annual report. 2. In order to find pragmatic solutions to this problem, the Commission set up the EU Joint Forum on Transfer Prices (JTPF) in October 2002. The Commission has twice reported on two submissions on the work of the GfbV. The first submission[1] introduced a code of conduct[2] relating to the Double Taxation Elimination Agreement (the “Arbitration Agreement”)[3] to ensure its effectiveness. The second communication[4] presented a code of conduct[5] relating to the documentation requirements for transfer pricing within the EU and EUTPD. The EUTPD Code of Conduct sets out rules on the scope and nature of the documents that Member States request and accept for the purposes of their own transfer pricing rules. 78. As part of the assessment process, the tax authority should endeavour to obtain the taxpayer`s agreement on the position of the tax administration. It is beneficial for the tax authorities and the taxpayer to work together to keep the process on track.

A Pre-Pricing Agreement (APA) is a procedural agreement between one or more tax payers and one or more tax authorities, which aims to avoid transfer pricing disputes by pre-defining a set of criteria for certain cross-border controlled transactions within a specified time frame, to ensure that they respect the length-of-arm principle. All agreements should describe in detail the terms and conditions of the APA. The main advantage of an APA is the creation of planning and legal certainty with respect to transfer pricing issues, which avoid future (expensive) conflicts, simplify future processes and audits, and avoid the interest rate in the event of late payment. However, from the subjugation`s point of view, the flip side of such planning security is the restriction of freedom of enterprise, since the binding effect of the APA requires the effective implementation of the underlying facts and circumstances. Other drawbacks may be the initial cost of an APA, which takes a lot of time and can commit internal and external resources. 7. The full GfbV report is contained in a working paper by the Commission`s services. As part of the general settlement and dispute prevention, the RAC has examined several procedures that could reduce the burden of transfer pricing on subjects within the EU.