Transfer price adjustments between related financial institutions by European tax authorities are becoming increasingly common. Adjustments initiated in one country are typically not accepted in the other involved county without further actions, which often results in double taxation. However, only a small number of the transfer pricing adjustments have been subject to mutual agreement procedures. Medium-sized multinational financial institutions have often accepted double taxation to avoid the expensive and unpredictable outcome of mutual agreement procedures.

In this article from Financial Solutions International, NERA Special Consultant Dr. Alexander Voegele and Florence Forster of University Paris I, Sorbonne argue that the EU Arbitration Convention is a perfect solution for resolving these issues, for it obliges the signing EU Member States to avoid double taxation and limits the term of the arbitration procedure to three years.

This article, which first appeared in the Spring 2006 issue of Financial Solutions International, has been reproduced with permission from the publisher. All rights reserved. For more information, please visit www.fsipublishing.com.