Treasury Releases White Paper on European Commission's State Aid Investigations: The Treasury Department released a white paper titled “The European Commission's Recent State Aid Investigations of Transfer Pricing Rules.” For selected prior coverage on EU state aid investigations, click hereand here.
The white paper says the investigations have caused the “Commission to second-guess Member State income tax determinations” and were “an unforeseeable departure from the status quo.” The white paper also criticizes the retroactive recoveries sought by the European Commission (Commission) in the investigations, which “departs from prior practice[,] . . . would be inconsistent with EU legal principles[, and] . . . would undermine the G20’s efforts to improve tax certainty and set an undesirable precedent for tax authorities in other countries.” The white paper further states that the Commission's approach departs from the Organization for Economic Cooperation and Development’s (OECD) transfer pricing guidelines by “employing a different arm’s length principle that is derived from EU treaty law.” The white paper concludes that the Commission's actions “undermine the international consensus on transfer pricing standards, call into question the ability of Member States to honor their bilateral tax treaties, and undermine the progress made under the OECD/G20 Base Erosion and Profit Shifting ('BEPS') project.”
Multilateral Tax Cooperation Convention Adds Signatories: The OECD announced that Burkina Faso, Malaysia, Saint Kitts and Nevis, Saint Vincent and the Grenadines, and Samoa signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters today, bringing the number of participating jurisdictions to 103. In addition, Andorra, Saint Kitts and Nevis, and Senegal deposited their instruments of ratification of the convention. As a result, the convention will enter into force in each of these jurisdictions on December 1.