Exploring The Synergy: VAT And Transfer Pricing

Background

VAT and transfer pricing have always had an ambiguous relationship, which has led to uncertainty for businesses and stakeholders with regard to what are known as the Transfer PricingAdjustments (TP Adjustments). Although there is currently no binding guidance on the VAT treatment of TP Adjustments, efforts have been made by the EU Commission's VAT Committee and VAT Expert Group to offer clarification.

In its working paper from 28 February 2017 on thePossible VAT implications of Transfer Pricing,the VAT Committee highlighted the clear need for guidance on the VAT implications of transfer pricing rules and, in particular, TP Adjustments. The VAT Committee provided further reflection on the interaction between the two subjects and suggested various considerations for evaluating the relevance of a TP adjustment in VAT assessments.