Those connected to the transfer pricing world have already learned how the iCase turned out. (here our LinkedIN post).

Four years ago (here, TPS commentary, August 2016), the European Commission imposed Ireland to recover 13 billion euros plus over a billion interests from the Apple Group, as illegal State aid granted through selective tax breaks.

At that time, the Commission seemed very convincing in having a case (with evidence in documents and minutes, like that Cost Share Agreement (here, commentary based on the Commission decision, March 2017 - RO).

Meanwhile, the evidence proved rather assumptions. And the EU General Court finds that “the Commission was wrong” (here, press release, and here, the judgement), after examining the pleas in law raised by Ireland and ASI and AOE (Apple’s divisions involved), after amending assumptions and speculations (i), but most of all, after carefully reading the “authorized approach in transfer pricing”, the OECD’  Guidelines.

This is the perspective we would like to emphasize today. 

And the winner is (for now) … 

As expected in a case involving such heavy players, with enormous economic and political implications, the 15 July decision is and will be open to interpretation. Yes, Apple won, but the giant already accepts that things are changed, in Europe but also at home. Yes, Ireland won, but the case was already seen as a lose-lose situation (on one side, 13-14 billion would have made a difference in times like this, on the other, Dublin know they cannot protect anymore a low tax regime that fantastically worked in attracting new technology stars). And yes, the EU Executive lost another technical battle (ii), but not the political war - the new taxation normal is already in place, the direct tax harmonization project is going on, and … the  Commissioner for Competition from 2016 is today the Executive Vice-President, setting the strategic direction of the political priority "Europe Fit for the Digital Age". And taxation has for sure allocated a pretty special place in this fitting.

Plus - do not forget Poland in this tableau! What about Poland? Good question. While it’s not unusual to see member states which support each other in their legal battles with the Commission on state aid hot issues (iii), this time we surprisingly have a member state sending its cavalry to "contends, in essence, that the Court should dismiss the action in Case T‑778/16, in accordance with the form of order sought by the Commission”. What are Polish stakes in this World Tax Fight? Until now, they get an order to bear their own costs in this judgement.

But, beyond all of this, we see this judgement rather a triumph of the Transfer Pricing Guidelines, that extraordinary platform, both stable and flexible in its structure, "seeking to achieve the balance between the interest of taxpayers and tax administrators in a way that is fair to all parties”, as the July 2010 Edition states. By the way, Happy Anniversary, dear partner!

Let’s recognize that into an EU having special relationship with the arm’s length principle (iv), the Authorized OECD Approach honored again its duty.

From this perspective, we proposed you a briefly review on this landmark case in a way that could be useful even for the not so special businesses.

Forget, for the moment, about Apple brand (considerate it a kind of fruit company, as Forrest Gump would say), forget about those 13 billion, forget about the political stakes. Just call it quite an usual transfer pricing case requiring, according to the Authorised OECD Approach, a more detailed  analysis of the functions actually performed within the permanent establishment, only that the tax administration is presuming that the functions had been performed by the permanent establishment when those functions could not be allocated to the head office of the company itself. (based on recital 242, the judgement of 15 July 2020)

So, please make you comfortable and pay attention:

  1. Not in dispute

 In the present instance, it is not in dispute that (recital 173):

–        ASI and AOE are companies (within the Apple Group) that are incorporated in Ireland, but which are not considered to be tax resident in Ireland.

–        The Irish Taxes Consolidation Act contains provisions that apply specifically to non-resident companies under which, where a non-resident company carries on a trade in Ireland through a branch, that company is to be taxed, inter alia, on all of its trading income arising directly or indirectly from the branch;

–        the non-resident companies ASI and AOE carried on a trade in Ireland through their respective branches.

  1. In dispute

The dispute in the present instance centres around the taxation of companies that are not tax resident in Ireland and which carry on a trade in that State through their Irish branches. The issue therefore lies in determining what profits must be allocated to those branches for corporation tax purposes as part of ‘normal’ taxation, taking into account the normal rules of taxation applicable in the present instance (204).

  1. A simple fact

In its primary line of reasoning the Commission considered, in essence, that the profits of ASI and AOE relating to the Apple Group’s IP (which, according to the Commission’s line of argument, represented a very significant part of the total profit of those two companies) had to be allocated to the Irish branches in so far as ASI and AOE had no employees capable of managing that IP outside those branches, without, however, establishing that the Irish branches had performed those management functions. (243)

       4. … it’s not an evidence

In order to substantiate its assessment, the Commission relies to the cost-sharing agreement concerning all of the relevant functions relating to intangible property subject to the agreement in question and the related risks. Each of those functions and risks has an ‘x’ next to it in the columns for, respectively, Apple Inc. (identified as ‘Apple’) and ASI and AOE (identified collectively as ‘International Participant’), except for IP Registration and Defence, which is solely associated with Apple Inc. (260)

      5. A simple list …

As Apple Inc. claimed in the administrative procedure and as ASI and AOE have argued before the Court, it is apparent from the exhibit in question that it lists the functions that the parties to the cost-sharing agreement were authorised to perform and the associated risks that they might have been required to assume. However, the Commission provided no evidence to show that ASI or AOE, let alone their Irish branches, had actually performed any of those functions. (263)

  1. ... doesn’t necessary make things “clear”!

In addition, with regard to those functions and risks, the Commission contends that it is ‘clear’ that, with no employees outside their Irish branches, ASI and AOE would not have been able to monitor such risks. However, the Commission provides no evidence that demonstrates that the staff of the branches in question actually performed those functions and managed those risks. (264)

  1. It is needed a detailed analysis of the type of activities…

After analysing the functions and activities performed by ASI’s Irish branch which the Commission had identified as justifying allocating the Apple Group IP licences held by ASI to that branch, it must be concluded that these are support activities for implementing policies and strategies designed and adopted outside of that branch, in particular with regard to the research, development and marketing of Apple-branded products. (283)

  1. … to justify the need of valuable or unique assets allocation

In those circumstances, it must be concluded, as was argued by Ireland and ASI and AOE, that the Commission erred when it considered that the functions and activities performed by ASI’s Irish branch justified allocating the Apple Group’s IP licences and the income arising from those licences to that branch. (284)

  1. Test only where there are reliable data!

(In the context of TNMM), the OECD Transfer Pricing Guidelines do not state which party to the transaction must be chosen, but recommend choosing the undertaking for which reliable data regarding the most closely comparable transactions can be found. It is then specified that this often means choosing the associated undertaking which is the least complex of the undertakings concerned by the transaction and which does not have any valuable intangibles or unique assets. It follows that those guidelines do not necessary require that the least complex entity be chosen, but that they simply advise choosing the entity for which the greatest amount of reliable data exists (335).

  1. Wondering which is the proper profit level indicator?

It follows from paragraph 2.87 of TP Guidelines that the profit level indicator [sales or operating costs] must be focused on the value of the functions of the tested party, taking account of its assets and its risks. Therefore, according to those guidelines, the choice of profit level indicator is not fixed for any type of function, provided that that indicator reflects the value of the function in question. (357)

  1. Again, a detailed analysis is the key

Such a fact [ASI’s sales increased exponentially during the reference period whereas the operating costs of its Irish branch remained stable] is not sufficient, in itself, to call in question the choice of the operating costs as the profit level indicator. Indeed, the Commission established its line of reasoning without indicating the reason why an increase in ASI’s sales would have necessarily involved an increase in the profits to be allocated to its Irish branch. (389)

  1. It’s not enough to claim “methodological errors”

The Commission did not succeed in demonstrating that the methodological errors to which it had referred with regard to the profit allocation methods endorsed by the contested tax rulings, consisting in the choice of the Irish branches as tested parties, the choice of the operating costs as the profit level indicator, and the levels of return accepted by the contested tax rulings  had led to a reduction in ASI and AOE’s chargeable profits in Ireland. Accordingly, it did not succeed in demonstrating that those rulings had granted those companies an advantage. (480)

  1. Reasonable and reliable! Rest my case.

Analysing transfer pricing is not an exact science and it is not possible to check for exact results as to what is considered to be an arm’s length level. In that regard, it is necessary to recall paragraph 1.13 of the OECD Transfer Pricing Guidelines, which states that the objective of determining transfer pricing is ‘to find a reasonable estimate of an arm’s length outcome based on reliable information’ and that ‘transfer pricing is not an exact science but does require the exercise of judgment on the part of both the tax administration and taxpayer’. (455)

    + 1 allusion to the (foreseen) new EU stage of development

The fact remains that, at the current stage of development of EU law, the Commission does not have the power independently to determine what constitutes the ‘normal’ taxation of an integrated undertaking while disregarding the national rules of taxation. (223)

(i) Just two examples:
The Commission argues, in essence, that ASI’s Irish branch performed all of those functions and assumed all of those risks relating to the Apple Group’s activities outside North and South America without providing evidence of the actual performance of those functions or assumption of those risks by the branch in question. Given the extent of the Apple Group’s activities outside North and South America, which represent approximately 60% of the group’s turnover, the Commission’s assertion in that regard is not reasonable” (267)
In any event, the mere allusion, during the exchanges between the Irish tax authorities and the Apple Group preceding the 1991 tax ruling, to the fact that the Apple Group was one of the largest employers in the region where the Irish branches of ASI and AOE were established does not prove that ASI and AOE’s chargeable profits were determined on the basis of employment-related issues (…) Thus, in the absence of other evidence, the Commission cannot argue that the tax ruling in question was issued as consideration for the potential creation of jobs in the region” (440+441).
 (ii) In 2019, the EU Court annulled Commission Decision 2017/502 on State aid implemented by the Netherlands to Starbucks, and Commission Decision 2016/1699 on the excess profit exemption, State aid scheme implemented by Belgium; In the same time, the Court uphold Commission Decision 2016/2326 on State aid which Luxembourg granted to Fiat.  
 (iii) For example, Ireland supported Belgium (Cases T‑131/16), Luxembourg (Cases T‑755/15), and Netherlands (T‑760/15), and received support from Luxembourg (T‑778/16)
(iv) “The arm’s length principle, as described by the Commission, is thus a tool enabling the Commission to make that determination in the exercise of its powers under Article 107(1) TFEU. Moreover, the Commission rightly noted, in recital 256 of the contested decision, that the arm’s length principle served as a ‘benchmark’ for verifying whether the chargeable profit of a branch of a non-resident company was determined, for the purposes of corporation tax, in a manner that ensured that non-resident companies operating through a branch in Ireland were not granted favourable treatment as compared with resident stand-alone companies whose chargeable profits reflected prices negotiated at arm’s length on the market”. (214+215)


In March last year, we announced our 10 years of TPS (without alliteration). Today, a year later, we could announce we already have 15, with  so many things happening all at once into an ever-expanding agenda!

Don't worry, we’re not going into relativity discussions! We merely mind our own business - i.e. transfer pricing. However, as #DAC6 and #Pillar 1 are finally on the move, relativity will be at home with us anyway.

In short, upon our 11th anniversary, we remain – as always – true to our values: honesty and passion for our work. Whatever we do, we keep in mind, as our reference system, our clients’ needs - of today and tomorrow.

This is what we stand for and I wish to thank each member of TPS team for the way they embrace and give life to our core values. TPS success is precisely their doing.

Until next year (when TPS turns 20!), keep in touch and see you at our #transferpricing & #DAC6 workshops!


Thank you for your trust

Adrian Luca

founding-partner TPS 


Today our office was home to the first DAC-Partner workshop and if I were to pick one word to describe the event, it would be INSTRUCTIVE. Ok, it’s two of them: VERY INSTRUCTIVE.

And this was thanks to our partners, all the 24 participating managers of the Tax/Compliance departments of high flying companies (keep it at that: the most profitable company in Romania, the biggest employer, the most powerful Romanian tech brand name etc.), in industry, services, including providers of intermediation services. I’m once again thankful to them for, through their active participation*, helped me and NNDKP colleague Silviu Bădescu to better understand the specific concerns of the business environment about this DAC6 over-reporting requirement. Also, I think that the cross-fire of questions and answers generated by our free talks helped us get a better sense of what we know and what we don’t know for now, about how the Directive is to be transposed through the new adopted Government Ordinance (OG, in Romanian) 5/2020.

By the way, let us mention that 23 of the 24 participants (that is 95%**) expect the ANAF (The Romanian Tax Administration) clarification guidelines to be the first factor to help their compliance with DAC6. Ranking second is ”clearer procedures in the matter at the level of their own group”. Then follow ”automation of the reporting process”, ”training for the tax department” with the ”delegation of compliance process to intermediary involved in transaction / a third party” factor coming last. This order is completely explainable to our participants as highly knowledgeable professionals (half of whom have known of DAC6 for more than six months): they realized, particularly once national legislation was published, that DAC6 was about the transactions of their companies and, since they are relevant taxpayers, they / their companies must be in control of reporting.

For that matter, 90% of them said they favoured the concept that their intermediary report solely with taxpayer’s consent, as also suggested by OG5. And 95% of them said they would appoint a company officer to be responsible for supervising transactions for DAC6 purposes.

To note that the big companies, while using a consultant (that is 65% of our respondents), mostly apply arrangements/transactions prepared by the specialist departments of the company / Group (hence the above mentioned need for clear Group-wide reporting procedures to be in place).

Sure thing, assigning the reporting responsibility is a thorny issue (as shown by 55% of the votes), particularly in terms of compliance costs (40% believe that such costs would be increased by at least 25%), at which point I brought up the automated solutions built for the purpose of DAC6, such as the VinciWorks solution, which is also available in the UK market. I once again assert my willingness to hold DEMO sessions at any time to show how such a solution can help you better manage the data you need for your DAC6 compliance (click here to sign up for a DEMO session). I equally want to re-emphasize that this automatic solution, well, won’t promptly tell you you should report this, you shouldn’t report that!

Yes, this is the great challenge, classifying / identifying the transactions to report, as also pointed out by our participants (90% of the answers).

For 100% it’s all clear – less than a quarter of their transactions involve a tax advantage. However unanimity vanishes when it comes to the percentage of the transactions that should be reported under DAC6. There are taxpayers that see a reporting percentage going as high as 50% of their transactions (15% of the votes) taking into consideration that there is a wide reporting area going beyond the main benefit test (which, by itself, offers a generous margin of interpretation as it is). And things become more complicated when it comes to the relationship with related parties: for 45% of the respondents, their inter-company transactions account for more than 50% of the total number of transactions (in 17% of the cases the threshold of 75% of the transactions is exceeded). As it is known, for ”Category E” (hallmarks concerning transfer pricing), reporting does not depend on the existence of a tax benefit. Likewise, for some of the ”Category C” transactions involving deductible payments between associated enterprises, it is not necessary the existence of a tax advantage. This is why more than half of the respondents agree that documenting intra-group transactions (economic substance, market analysis) helps minimize uncertainty related to the DAC6 reporting.

And while we’re at no-test transactions, the issue of transactions with parties residing in countries that do not have an agreements on automatic exchange of information in place with Romania was raised during the workshop. Even though not every single transaction falling under ”Category D” with entities in such countries is automatically reported, it is advisable to check the existing status of the automatic exchange of information here, on OECD’s official website.

In terms of the actual analysis of transactions, taxpayers identify their own major types of transactions with a reporting potential as follows (multiple choice):

  • Payments that enjoy a preferential tax treatment in the jurisdiction where payment beneficiary is tax resident - 55%
  • Loan conversion into capital/debt to equity swap - 45%
  • Payments to beneficiaries being tax residents in jurisdictions deemed as non-cooperative - 35%
  • Transfers of intangible assets - 30%
  • Transfer of a production operation concurrently with transfer of services and/or intangible assets as part of a business restructuring process - 15%
  • Other - 40%

Once again, what seems obvious at first glance is that there is reporting potential in these types of transactions. It takes a review of each individual transaction (first of those which have become effective since 25 June 2018 until now) – which review should be first undertaken by the beneficiary company (the relevant taxpayer), then by the company together with the involved intermediary, and if need be (for instance, where divergences are encountered by the two parties), the opinion of a third party observer should be sought. Both how we report and not report (that position-paper whereby we explain our decision not to report) transactions become crucial points in the economy of the DAC6 compliance process, which is not completed upon filing the DAC6 statement (statement which may look like this, see TPS’ article in July 2019).

A significant number of respondents already consider the effects of post-reporting: 60% already expect that reporting be followed by their company being classified under a higher tax risk.

Under such circumstances cases where DAC6 may have an impact are expectable, as is a potential need to change a company’s business model, including the type of its transactions – as believed by 75% of the participants in the DAC-Partener workshop.

To them and to our other business partners, we promise to keep standing by to ensure that the impact of DAC6 is not just easy to manage, but also that it ends up appearing as propitious for the (financial) health of that company / group.

Continue to rely on us! That being said, we look forward to seeing you at our next interactive and instructive DAC-Partner workshop (February 26). Please click here to sign up!


Thank you for your trust




* For the precise reason that we sought and keep seeking interactive workshops, where everyone is given an opportunity to air their views, we decided to cap the number of participants at 25 individuals. We will keep such restriction for the next workshops as well.

** The questionnaire in this piece was administered using a real time audience surveying automated platform. In order to make them more suggestive, we expressed results as percentages and as wholes (please consider this in any conversion into absolute data.)


DAC6 Resources

Questionnaire + Answers, TPS workshop, February 2020

DAC6 - Implementation Status, EU level, TPS, January 2020

Evaluation of the Directive on Administrative Cooperation, European Commission, September 2019

DAC6 - an introduction, TPS, July 2019



A week ago, Greenland was made news that went rather unnoticed, possibly in the safe knowledge that it is somehow linked to the new normal – the island saw, in one day, the melting of 12.5 billion tons of ice! If we are into comparisons, we look at an amount big enough to get the state of Florida covered under 12 cm thick water layer or the whole of Denmark submerged under a half of meter water blanket. But I think no one is really into this kind of comparisons and let us therefore leave them breezily to tomorrow’s generation (such a fast ice melt was only supposed to occur 50 years from now anyway!)

Maybe when glaciers have shrivelled further and Greenland has become green again, the anecdotic around this casual proposition made by the Americans in the time of Donald Trump to buy the island from the Danes will be better understood. Even though the politicians of the small kingdom were quick to dub the offer as abusrd (which word elicited an absurd undiplomatic reaction from Trump, who cancelled his state visit in Copenhagen), it’s worth noting an article recently published in a leading local newspaper, which explains that in a new, thawing Arctic, Americans will fight to beat the Russians and the Chinese to Greenland at any cost. Now it is hard to say what “at any cost” precisely means. But this is a matter of geopolitics, and it means at least medium term.

For now, as long as glaciers are still around, I will bring up the less visible side of this casual outrage. Once in Copenhagen, after Queen Margrethe’s reception, president Trump would have had plenty to talk about with Ms Frederiksen, the young chief of the Danish government, besides the topic of Greenland. He may have complained about a certain Dane who hates the US more than any person that I’ve ever met. He said that a month ago, he also said it last year while waiting in Washington for the CE chief amid a full-blown trade and tax Transatlantic war – ”your tax lady … really hates us!”. That tax lady is not really the tax lady, but very close to it: Margrethe Vestager, the European Competition Commissioner in the past five years. In such capacity Ms Vestager conducted heavy-handed investigations that resulted in fines of billions, even tens of billions of euros on the American giants Apple and Google over charges of unfair fiscal competition (the matter was in more detail dealt with in my last July article on Atlant-EXIT).

Until recently, Ms Vestager was tipped as head of the Commission for the next five-year term, with the tiny Denmark notably looked upon as among the top five most influential states in the EU. Her appointment never materialised, but odds are high to meet again the energetic Dane in the new Commission (as the firm proposal of her country) in the very same position. The appointment of Ms Vestager would be a clear indication that Europe is not going to give in in the fiscal Transatlantic battle and, even more, that it is determined to speed up, at any cost?, the controversial projects, which are so irksome to its American partners. By this I mean the battle over the revenues of the (American) Internet giants in the form of digital tax, then the battle over the splitting of profits under the new-fashioned European rules using the Common Consolidated Corporate Tax Base (CCCTB). Both projects were also mentioned in her plans by Ms Von der Leyen, the new President of the European Commission.

In the world as we know it, taxation among siblings (i.e. members of one group) has been dealt with pragmatically, in terms of arm's length prices. But the world changes, taxation changes and battles are underway whose outcome is hard to predict. At least as long as they are waged under the economically preposterous slogan ”at any cost”.

As always in times of crisis, new opportunities arise. Back on our Romanian turf, with the Americans having just reassured us of our bright future, perhaps the Europeans too will want to know more details about how do we play this? For that matter, with some degree of skilfulness we could indeed achieve a status to match our real potential. While we’re in the election season, we may get some answers to the hot matters that should be on our agenda. If it’s not too much to ask, by the time Greenland is green again.

The original version (RO) appeared on the Romanian platform "Contributors", August 2019. By Adrian Luca, TPS 

Getting through to a taxpayer via its tax advisor is no new policy. It first started 20 years ago in the US and moved on to the UK placing intermediaries under an obligation to report the so-called tax avoidance schemes. The EU is now joining the club with an
unpredictable experiment enforcing common minimal standards in reporting ”potentially aggressive tax arrangements”. An experiment which is unpredictable primarily for multinational groups of enterprises to be faced with interpretations of 27 (28, because, despite BREXIT, UK seems to be in this game) jurisdictions which are still different from each other in terms of direct taxes.

In preparing the unavoidable moment of DAC6 becoming enforceable, this TPS paper sets out to bring together some of the myriads of questions and ambiguities, and some of the few certainties related to the new obligations, based on materials issued so far by the European Commission and other Member States.

Please find here the entire article.

The original version (RO) appeared in the Romanian Tax Advisers magazine, in July 2019 

by Adrian Luca - TPS

It’s easy to castigate politicians for their fiery speeches. On Tuesday (16 July 2019), Outgoing President of the European Council, Donald Tusk, tweeted to inform us that ”I am a fanatic of EU’s unity, (...) When she [Ursula von der Leyen] says that she will be a passionate fighter for Europe's unity and strength, she means it”. A couple of hours later, Mrs von der Leyen, running for president of the European Commission, would become as passionate to convince sceptical MEPs: ” Anyone that is with me in wanting to see Europe grow stronger and to flourish and blossom can count on me as a fervent supporter”. An ardency which was reported by the leading news agencies, which, as a matter of detail, is not to be found in the original version of the speech.

“Passion” or even ”good fanaticism” ultimately may sound good, but even higher effectiveness might be contributed by sound, well-supported arguments, particularly when you deal with 28-1 Member States also headed by politicians who may feel it is their duty to defend their national interest with passion / fanaticism after all.

I think we can agree that it is not for her passion that Mrs. von der Leyen was formally elected into EU’s top job yesterday. This is precisely why we should carefully examine the pragmatism of her words. And, while we mentioned taxes, let’s stick to taxes for a bit longer. Reads ”My agenda for Europe” presented yesterday: ” A common consolidated corporate tax base would provide businesses with a single rulebook to compute their corporate tax base in the European Union. This is a longstanding project of the European Parliament and I will fight to make it a reality.”

It is a longstanding project indeed. In ”My Agenda” in July 2014, candidate Jean-Claude Juncker stood in front of the new Parliament with a revealing statement: ” I will notably press ahead with administrative cooperation between tax authorities and work for the adoption at EU level of a Common Consolidated Corporate Tax Base and a Financial Transaction Tax”. He jettisoned the latter tax (the echoes of the Great Crisis has died away since), even though the concept of a special tax would resurface, for the digital sector this time over. However, administrative cooperation has strengthened [1], and the common corporate tax base, and later on consolidated (CCCTB) would rise in full force. [2]

As early as June 2015 one could have announced the impending CCCTB (here our very first comment: Something tougher than BEPS? Yes, it’s CCCTB – the new shockwave from Brussels!) At a different speed at that: mandatory for large businesses (in 2011 it ). And the speed kept going up. Since then I have been watching this train, passionately, so to speak, sneaking into all press releases regarding the European future, trundling out of the European Parliament, receiving a fresh momentum from the German and French engines in the Meseberg station and reaching the final compromise the last month during the Romanian Presidency of the EU Council (here the June comment).

Now the train is revealed in its true size – we should expect a mandatory common tax base for (nearly) all the European companies. What is yet to be added? A small detail, as long as there still are Member States such as Ireland, which, out of passion, still ask the question: OK, what is then left for us if you also take the last lever of tax competitiveness? (here a recent article on the Irish state of mind, also relatable for the Northern states).[3]

And this is when the difference-making detail will turn up – an expansion of the possibility that even the momentous EU taxation-related decisions end up being taken by qualified majority (taxation is still the last domain to require unanimous vote at EU level). In other words, it will suffice for the great states to lure a handful of allies and turn their resolve into a EU tax law. (here a stance on the matter) Sure thing, Ms von der Leyen’s agenda has this covered as well – ”I will make use of the clauses in the Treaties that allow proposals on taxation to be adopted by co-decision and decided by qualified majority voting in the Council. This will make us more efficient and better able to act fast when needed.”

A warm-up pitch for the great CCCTB is now the already famed digital tax mentioned above, which is a turnover tax on tech giants [4].

As a matter of fact this is rather a piece of fanaticism of the French which was nilly-willy embraced by others. However, in spring their failure to meet the requirement for unanimity (substantially, on the same grounds as those with the CCCTB) had to be conceded. For now, the French show defiance and were the first to introduce their own digital tax, and already elicited a… passionate response from the Americans (famous Resolution 301 which may end up in customs surcharges).

Of course, the French and those who still think about this kind of moves on their own cannot be left unsupported. Mrs. von der Leyen again: ”I will ensure that taxation of big tech companies is a priority. I will work hard to ensure the proposals currently on the table are turned into law. Discussions to find an international solution are ongoing, notably at the Organization for Economic Cooperation and Development. However, if by the end of 2020 there is still no global solution for a fair digital tax, the EU should act alone.”

For more than five years now, I have been ending my addresses with a question – How should the small European economies play more efficiently? It is not a question asked out of mere passion, but of pragmatism for that matter. I am aware of many players in the emerging area who share the same line of thought – we do want to stay in Europe, we don’t want to counter the European trains, but we want them to pass through our station as well. Instead, we need an answer to the (Irish) question above, related to competitiveness. As soon as possible in fact, as the new German traffic controller in Brussels is obviously less than keen to wait the following five years.

[1] see companies being placed under an obligation to report for each individual country where they are present, CbCR, now also super-transparency for intermediaries, DAC6
[2] The former EC headed by Manuel Barroso had also put all of their energy and passion in opening the long-standing file of common tax base. But these are the ways of the big files – they are on the Agenda, no matter who holds that agenda at the time. Or maybe it’s more fitting to speak of legislative trains (a comparison used at the very EU level, as it happens) which may adjust their route or even destroy one or two switch boxes in the process, but the intended destination remains, by and large, unchanged.
[3] On the shiny side of the coin there is of course the advantage of doing away with the intra-EU barriers. However, the reverse of the coin is less attractive now. In brief, the small economies will be forced into sharing the same high speed railways with the big ones. This is virtually the inception of an even tougher competition for added value between heavy hitting investors. More details on this comment.
[4] By way of comparison, such tax would be tantamount to excoriate politicians on account of every word they keep tossing about. In fact, they keep telling us – this is way too simplistic, judges us by our results rather than words! Which is pretty much what businesses want – Tax us based on our results (profit), rather than sales!

Three years after, the world is still in the middle of the mystery – how does it happen? We're talking about BREXIT.

Some find out clear evidence that it is about hidden AI.

Following, is another explanation – it’s about …TP: UK has troubles with its European affiliates on PRofit allocation. (here is the TPS point from June 2016)!

PREXIT is the real question! An unprincipled transfer pricing consultant* enters the scene wrong using the profit split method. Altering the methods, altering the outcomes…
In the real life, it happens all the time to take decisions based on the consultant recommendation. So be careful who you work with (in transfer pricing, at least)!

*Could be those guys with the … alliteration? Just an hypothesis.


A transfer pricing consultant is desperately looking to bring out the WOW effect, but is lost in … alliterations: CCCTB, customer care, customer centric, real remuneration ... Lover’s Labour’s Lost.
The Alliteration Brigade” is Transfer Pricing Services first skit celebrating its TEN years of real services, no alliteration. And this is certified by our customers! Thank you for trusting us.

And by the way …
"Bring out the charge of the love parade/There is spring in the air once again/Drink to the sound of the song parade/There is music an love everywhere...

Here is the Transfer Pricing Services' "Response to the Roadmap for more efficient law-making in the field of taxation: identification of areas for a move to qualified majority voting (QMV)", which was sent to Brussels on 21 January 2019.    

Dear Madam / Sir,

Thank you for the opportunity to provide our thoughts on adopting “Qualified Majority Voting for certain tax issues”, which is a subject of historic importance, crucial for the European project and Member States’ development.

Our perspective is not a simplistic approval or disapproval of QMV per se. Acknowledging that this is part of the natural evolution of the Union, especially in a turbulent global context, we should not see QMV as a European panacea, keeping in mind that the real issues need real solutions.

We would like to draw to your attention a few aspects we consider to be important (and not only us, as we are pleased to see from other organisations’ feedback):

1. About the big picture

We were aware of the imminence of QMV, based on the messages sent in recent years by the Commission, and even by European Parliament representatives, regarding the revolutionary CCCTB process and digital taxation.

As tax professionals acting in the field of cross-border transactions, we regard these tax issues as an aggressive way of removing the old and valuable market-based (arm’s length) principles, to be replaced by an administrative approach regarding profit allocation between Member States. It’s not hard to imagine why it takes so long to foster unanimity around measures which will dramatically change national taxation systems, eroding the local competitive framework. The smaller economies, especially those dependent on the transfer of technologies to cover the development gap, need to be convinced that there is a way to compensate for CCCTB in order to attract value-added investments, since local fiscal policy attributes are increasingly transferred to the EU level.

Instead of presenting the big picture, however, the Commission chose to present CCCTB unilaterally just as a measure which “would deliver unprecedented simplicity, ease of business and legal certainty for companies, while also ensuring that multinationals paid a fair share of tax proportionate to where they generate their profits. However, the CCCTB remains on the negotiable table in the Council, as Member States continue to try to unanimously agree on the future of corporate taxation” (Commission Communication, 15.01.19). But again, this reluctant attitude from some member states is not so inexplicable.

2. About open communication

The fact is, when it is perceived as fair, when it is well explained and understood, a good measure doesn’t really need QMV to be adopted.

By acknowledging that ATAD was achieved by unanimity, the Commission is immediately adding that the adoption “was fuelled by the public and political reaction to high-profile tax scandals, rather than by a common vision on how EU tax policy should advance”. We don’t see any contradiction here, because finally any vision /the best vision needs public final approval.

The Commission provides more details in the ATAD case, however, stating that, “Agreement on ATAD was held up by certain Member States seeking permission for a VAT reverse charge”. That is presented as a counter-argument for the viability of the unanimity system, where “Member States can use important tax proposals as a bargaining chip against other demands they may have on completely separate files, or to put pressure on the Commission to make legislative proposals”.

Some questions arise from this unexpected statement. Has legislation been proposed that was not entirely in the European interest, being just for negotiation’s sake? Is this the case for the VAT reverse charge? Since QVM means at least gathering a majority, does it follow that we don’t have a guarantee that such unscrupulous negotiation games couldn’t happen again?

For the first 30 years, at least, the European project worked based on the sole mechanism of unanimity through negotiation - making concessions for receiving something in return. If this mechanism is not welcome anymore, has the EU put in place another instrument for accommodating the different perspectives from different economic structures and development levels?

3. About building trust

The Commission is correct in acknowledging “that sovereignty on tax matter is already limited by the Treaty freedoms and the principle of non-discrimination”. We can add here the long list of recent investigations conducted by DG Competition on tax rulings, with decisions based on the premise that, for example, the market-value principle is part of the TFEU (art.107). The court verdict is pending.

But despite this sovereign limitation, citizens still want to have more national control over their money, especially when they learn that “measures can be carried if supported by a minimum number of EU countries, representing a minimum share of the EU population”.

Through QMV on taxation, the Commission is now assuming an even more administrative approach in imposing a vision for the member states’ (fiscal) future, when a few (especially the larger economies) will decide for the rest of the Union in the most sensitive domain, suspending the old and valuable principle of unanimity. In many respects, this unanimity principle was the only guarantee that the measures agreed work for the benefit of all the members, no matter their size and power. By removing unanimity, QMV must put in place trust, besides efficiency.

The discrepancies, the gap development – this is the real issue that should be addressed by the Commission in order to be more efficient in convincing European citizens about moving to one way or another.

Behind the generous wording “QMV as a useful tool to progress measures in which taxation supports other policy goals, e.g. fighting climate change, protecting the environment, or improving public health”, more of us could understand that QMV is no more than an efficient way of imposing the same European duties for all European taxpayers, irrespective of their economic capabilities.

In building trust, QMV should also be an efficient way of imposing the same European rights for taxpayers – why not a Common and Consolidate Fiscal Procedures and Rights Base? Paradoxically, in a more administrative Europe, we don’t yet have a unitary code of conduct for a European-type tax administration. The improvement of local tax administrations would be an effective way to ensure a level playing field.

In brief

In order to be more convincing regarding the urgency of QMV, the European authorities should precisely limit the area of applicability to some well-explained measures, and not leave the door open for unclear “certain tax issues”. QMV should be presented in a more realistic way, always as the solution of last resort, and always keeping in mind that real issues need real solutions. Solutions which need to work for the entire European family!


“SA. 38945” could have been just another case about the tax rulings (issued by Luxembourg or other) found unlawful by European Commission. As it was “SA. 38375” (Luxembourg-Fiat Finance), or “SA. 38944” (Luxembourg-Amazon), or “SA. 44888” (Luxembourg-Engie) or the other “ad hoc state aid (S.A.) cases regarding tax base reduction”. But not this time – ”SA. 38945 is a State Aid granted by Luxembourg to McDonald’s, but do not infringe EU rules”. (the press release, here)

Actually, it is the first investigation under commissioner Vestager („the European tax lady”, as the US president called her) ending with the verdict „the arrangement is not illegal!”.

A very anticlockwise move, strange enough to see that it „comes a week before Vestager plans to meet U.S. officials and politicians in Washington amid criticism that EU investigations have often targeted successful American companies” (as Bloomberg noted).
But variations on the same … trend could appear anytime. Clockwise or anticlockwise, the trend is already known, the movie is the same.

The Curious Case of Benjamin Button, sorry of SA. 38945 is just another political button pressed by Brussels to deliver the picture of the EU integration stage, where a European Minister of Finance will give certificates for what is good or bad for the common (and less national) interest!

For the technical buttons we are expecting the public version of the final decision. Until then, be wise and … BEPS – Be Prepared to Switch your tax approach, as we used to say at TPS!