Given their economic importance, transfer pricing rules will be high on the corporate tax agenda (and the broader political agenda) for many years to come, and they are continuing to evolve at a rapid pace. First, as many of the chapters make clear, litigation over transfer pricing disputes is becoming ever more common.
Second, the fact-heavy nature of transfer pricing disputes means that they often take many years to reach resolution. Third, in the Fiat Chrysler judgment, published in November 2022, the Court of Justice of the European Union appears to have rejected the European Commission’s suggestion that there is an ‘autonomous’ EU arm’s-length standard, holding instead that transfer pricing standards are set at the national level.
Finally, the OECD/G20 project to address the tax consequences of digitalisation continues to progress. If it is ever implemented, which looks increasingly unlikely, Pillar One would mark a radical pivot away from the arm’s-length standard for large and highly profitable multinationals, so that a portion of their profits (above a 10 per cent hurdle rate) would automatically be reallocated to market jurisdictions. The Pillar Two ‘minimum tax’ reforms are much more likely to be implemented; for example, the European Union has already adopted a Pillar Two Directive, and the first part of the UK Pillar Two rules is included in the Finance Bill currently before Parliament. Pillar Two, as merely a minimum tax measure, has a less radical impact on transfer pricing than the Pillar One proposals; nevertheless, there will be many issues to work through here in the future.
This article was first published in The Transfer Pricing Law Review - https://thelawreviews.co.uk/title/the-transfer-pricing-law-review/editors-preface - Edition 7 (published in May 2023 – editors Steve Edge and Dominic Robertson) and was reproduced with permission from Law Business Research Limited.
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