The growing importance of Transfer pricing worldwide and specifically across Europe was one of the main reasons that Arthur Andersen representatives from various locations met recently, to compare experiences and trends. The Czech and Slovak tax practices were represented by Peter Chrenko.
Based on the results of the meeting, it is clear that management fees and royalties continue to be the most widely attacked areas in large number of countries, including the Czech Republic, Slovakia and other CEE countries. From the CEE region, the Polish tax authorities are the most active and several Transfer pricing cases have already been decided in the courts. Another important message is that the OECD Transfer pricing guidelines are generally followed by all OECD member and non - member states, no matter whether and to what extent the guidelines have been incorporated into the local legislation.
It also appears that the focus of European tax authorities Europe-wide remains particularly on the pharmaceutical and automotive industries, owing to the general characteristics of high volume cross border transactions generated by groups of companies in these industries. Therefore, there is a higher risk likely that these industries will be initially attacked in any country.
Based on recent meetings with Ministry of Finance officials, the Czech tax authorities will focus initially on transactions with related parties from tax haven jurisdictions, and pricing arrangements will be reviewed during tax audits. It was also stated that the Czech Ministry of Finance has no specific preference for one or another Transfer pricing method, but generally OECD guidelines which were published in "Financni Zpravodaj" 10/97 may be used. We would recommend that the local subsidiaries of Multinational enterprises which conduct a significant amount of cross border transactions within their group check whether they have proper transfer pricing documentation available to be presented when requested.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information on the above, please contact Mr Richard Fletcher by telephone on +420 2 2440 1300 or E-mail directly to Click Contact Link
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