Upcoming harmonization of transfer pricing rules

The European Commission proposes a unified framework for the application of key transfer pricing rules within the European Union. The aim of the harmonization of these rules among the individual Member States is to contribute to the reduction of tax evasion, the limitation of double taxation, and the reduction of the risk of legal disputes.

The European Commission with its proposal primarily unifies these aspects of transfer pricing:

  • definition of the arm’s length principle,
  • definition of related parties,
  • application of corresponding adjustment for cross-border transactions within the European Union,
  • application of the compensating adjustment,
  • key rules for determining the market price,
  • defining the role and status of OECD Guidelines,
  • transfer pricing documentation.

Below, we provide more detailed information on selected areas of harmonization.

Definition of related parties

Since the definition of a related parties may vary in different countries, we perceive this harmonization positively. According to the proposal, a related party is a person who is connected to another person in any of the following ways:

  • has a significant influence on its management,
  • holds more than 25% of its voting rights,
  • has a direct or indirect share in its equity that represents more than 25%,
  • is entitled to 25% or more percent of its profits.

Key rules for determining the market price

In accordance with the European Commission's proposal, the arm’s length principle is observed if the agreed price falls within the interquartile range, i.e. in the interval between the 25th and 75th percentile of values obtained from comparable transactions.

Prices that fall outside of this range have to be adjusted to the median value, unless it is demonstrated that an adjustment to a different point within the range is more appropriate to the circumstances of the specific case.


The proposal also defines 5 main methods of transfer pricing through which the market price can be determined:

  • the comparable uncontrolled price method,
  • the resale price method,
  • the cost-plus method,
  • the transactional net margin method,
  • the profit split method.

In this context, it is important to note that the mentioned rules and methods are not new for the Slovak legislation.

Defining the role and status of OECD Guidelines

The European Commission does not exclude the possibility of further adjustments or additions to specific harmonization points in accordance with OECD Guidelines.

Currently, the OECD Guidelines cover a broader area of transfer pricing. However, unlike the mentioned proposal of the European Commission, they are not legally binding for EU Member States.

Transfer pricing documentation

In addition to the harmonizing the content of the transfer pricing documentation, the European Commission has even greater ambitions. It plans to develop a common template for transfer pricing documentation and establish rules regarding language requirements. However, these ambitions should be implemented over time.

The harmonized rules should be implemented by the Member States into their national legislation by 31st December 2025, with their effectiveness starting from 1st January 2026.

Are you interested in the preparation of transfer pricing documentation or consulting in connection with transfer pricing

Our specialists will be happy to assist you.

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