Volume 46 (2018) / Issue 12

Ricardo André Galendi Júnior, 'State Aid and Transfer Pricing: The Inherent Flaw Under a Supranational Reference System' (2018) 46 Intertax, Issue 12, pp. 994–1010


This article deals with the theoretical problem of whether the arm’s length principle could be derived from EU law and whether such principle would offer a single answer to the allocation of synergy rents. The author puts forward two main arguments. First, he asserts that, under ECJ case law, unless a deviation from the general tax system set forth by domestic law of the Member State (reference system) is identified, transfer pricing cases will be generally an issue of tax disparity. Therefore, the alleged advantage would not attributable to the Member State. Second, the author holds that deriving an EU law arm’s length principle from Article 107(1) of the Treaty on the Functioning of the European Union means to build up a supranational reference system. Such reference system is not an obvious derivation from the equality principle, but a matter of allocation of taxing rights among jurisdictions, with significant and contingent tax policy impacts. If the ECJ chooses to follow this path, it will tie future direct tax decisions to the manifold consequences of the policy elected – which currently seems to be the OECD/G20 BEPS Project ‘value creation’ trend. Both arguments are illustrated through an analysis of the Belgian excess profit regime. The article is not a defence of the Belgian system, but merely uses it as an example, stressing the inconsistencies that arise from the supranational reference system argument.

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ISSN: 0165-2826
ID: TAXI2018105