The European Commission this week announced its decision, concluding that Luxembourg and the Netherlands had granted “illegal” selective tax advantages to multinational corporate entities, by means of tax rulings or comfort letters issued to the taxpayer companies. The EC found the tax rulings at issue endorsed “artificial and complex methods” to establish taxable profits for the companies; and that this did not reflect “economic reality” because the rulings set transfer prices for goods and services sold between member companies of the two corporate groups—prices that did not correspond to market conditions. The EC stated that because of the tax rulings, most of the profits of one multinational corporation were shifted abroad, to jurisdictions where they were not taxed, and the other corporation only paid taxes on underestimated profits.
The EC’s findings may have implications for other transfer pricing-related rulings, and the EC is continuing investigations of tax rulings issued to multinational entities by the tax authorities in Belgium, Ireland, and Luxembourg.
India: The Central Board of Direct Taxes (CBDT) issued guidance for Assessing Officers and Transfer Pricing Officers regarding the administration of transfer pricing assessments; the CBDT published final rules for the use of range and multiple year data.
Countries continue to implement recommendations under the OECD’s base erosion and profit shifting (BEPS) project. The Luxembourg government submitted draft legislative proposals to Parliament—legislation that, if enacted, would both implement certain provisions of the OECD’s BEPS actions and provide for certain EU-compliant measures. The proposals also would be intended to improve the competitiveness of the Luxembourg tax system.
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