Advance pricing agreements are the responsibility of the Central Tax Office.
This office negotiates them on the request of a taxpayer with the corresponding
authority abroad as a “mutual agreement” under the relevant double tax treaty.
They are therefore bilateral, although, according to the official notice on the
subject, a multilateral effect can be achieved by negotiating the same agreement
with a selection of foreign authorities. The notice emphasises the need for full
and frank cooperation between the taxpayer and the Central Tax Office, both
during the negotiations and during the currency of the agreement (typically
between three and five years). It clearly assumes that the taxpayer sees his
interests as coinciding with those of the tax office and displays a marked
preference for agreeing on methods and parameters (“critical assumptions”)
rather than on rates or amounts. Obviously, a taxpayer may well be more
interested in ensuring that income is only taxed once, than in the actual split
between the two countries.
The Central Tax Office charges a fixed fee for its negotiations. The standard
amounts are €20,000 for a new agreement, €15,000 for an extension of an
existing agreement and €10,000 for a change to reflect changed circumstances.
These amounts are halved for minor instances – annual sales of related party
products of up to €5,000,000 or of up to €500,000 in services.
EU Forecast
euf:ba18e:138/nws-01