Page 31 - Central and Eastern European Transfer Pricing Review

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When a transfer pricing study is the TNMM and proft split method should To what extent are transfer pricing
prepared, should its content follow be treated equally with the traditional penalties enforced?
Chapter V of the OECD Guidelines? transaction methods. Unknown.
Yes. However, it should be noted that
Chapter V is not directly applicable, rather If there is no priority of methods, is What defenses are available with
only through the 22/2009 MF Decree on there a best method rule? respect to penalties?
detailed regulation of transfer pricing, Not applicable. Default penalties can only be avoided
which is based on the OECD Guidelines, by complying with transfer pricing
including Chapter V. Transfer pricing audit and requirements.

Does the tax authority require an penalties What trends are being observed
advisor/tax practitioner to have When the tax authority requests currently?
specifc designation in order to a taxpayer s transfer pricing More and more attention is being paid to
prepare or submit a transfer pricing documentation, how long does the transfer pricing requirements during
study? the taxpayer have to submit its tax audits, and tax authority inspectors
No. documentation? are being trained accordingly. Although
Normal practice is to expect special industry focus or transaction
Transfer pricing methods documentation within 3 days focus has not yet been observed,
of request. management fees and royalties are
Are transfer pricing methods usually inspected thoroughly, as well as
outlined in Chapter II of the OECD If an adjustment is proposed by the benchmarking studies (the screening
Guidelines acceptable? tax authority, are dispute resolution steps, geographical selection, qualitative
Yes. options available to the taxpayer screening, and loss making comparables
outside of competent authority? in the benchmarking set, etc.).
Is there a priority among the After unsuccessful exhaustion of
acceptable methods? administrative procedures, a company Special considerations
Up to 31 December 2010, the traditional is entitled to bring the matter before the
methods (CUP method, RPM (Resale competent court. Are secret comparables used by
Price Method), CPLM (Cost Plus tax authorities?
Method)) were preferred. Basically, the If an adjustment is sustained, can No.
traditional methods should have been penalties be assessed? If so, what
applied, but if these methods were not rates are applied and under what Is there a preference, or requirement,
applicable, other methods could have conditions? by the tax authorities for local
been used. If the applied price is not in line with comparables in a benchmarking set?
arms length prices, the adjustment Yes. The tax authority prefers local
While the traditional transaction methods comparables. Where existing local
are still preferred by the tax authority, will have an effect on the amount of tax comparables are left out of the
according to the modifcation of Section payable. Accordingly, a default penalty of benchmarking set, the tax authority
(18) of CIT, effective from 1 January 2011, 50 percent and a late payment penalty
interest might be levied on the basis of may challenge the benchmarking study
the tax arrears due to such adjustments. prepared by the taxpayer and perform
its own search.

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