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Transfer Pricing in V4 Countries (PDF Format) Transfer Pricing in V4Countries Karel Brychta Michal Ištok Aleksandra Sulik-Górecka Veronika Poreisz Transfer Pricing in V4 Countries Karel Brychta Michal Ištok Aleksandra Sulik-Górecka Veronika Poreisz Reviewers Ing. Veronika Solilová, Ph.D. (Czech Republic) prof. Monika Wieczorek-Kosmala, Ph.D. (Poland) Acknowledgement This scientific monography is a part of the project Transfer Pricing in V4 Countries which was co-financed by the Governments of Czechia, Hungary, Poland and Slovakia through Visegrad Grants from International Visegrad Fund. The mission of the fund is to advance ideas for sustainable regional cooperation in Central Europe. © Karel Brychta, Michal Ištok, Aleksandra Sulik-Górecka, Veronika Poreisz 2020 Cover © Jan Janák 2020 © VUTIUM 2020 ISBN 978-80-214-5873-4 Karel Brychta, Michal Ištok, Aleksandra Sulik-Górecka, Veronika Poreisz Transfer Pricing in V4 Countries Lektorovali / Rewievers Ing. Veronika Solilová, Ph.D., prof. Monika Wieczorek-Kosmala, Ph.D. V roce 2020 vydalo Nakladatelství VUTIUM Vysokého učení technického v Brně / Published by VUTIUM Press of Brno University of Technology in 2020 www.vutbr.cz/vutium Obálku navrhl / Cover by Jan Janák Elektronické formáty zpracoval / Electronic formats processed by Michal Kaláb První vydání / First edition Vydáno v režimu open access / Released in open access mode This work is licensed under a Creative Commons Attribution-NonCo- mmercial-NoDerivatives 4.0 International License (CC BY-NC-ND). htt- ps://creativecommons.org/licenses/by-nc-nd/4.0/ DOI: http://dx.doi.org/10.13164/9788021458734 ISBN 978-80-214-5873-4 PREFACE In recent years transfer pricing has been one of the major topics of international tax discourse. Again, this was well demonstrated by the outcomes of the OECD BEPS Project, for which transfer pricing became one of the building blocks in combatting base erosion and profit shifting. As a tax topic, transfer pricing remains of great interest for taxpayers, tax administrations, tax practitioners and academia. Due to its complexity, as transfer pricing has specific legal, economic, political, social and other dimensions, ongoing discussions between the key stakeholders appear to be a necessity in furthering development in this area. This has been particularly considered in the methodology of the research project that resulted in this monograph, as the research itself was based on very intensive discussions and cooperation among economists, lawyers, tax advisors and tax officials. Transfer pricing originated as a set of international tax rules regulating business activities of multinational enterprises. The bilateral nature of transfer pricing is therefore one of its essential characteristics, as the final effects of the arm’s length principle always impact taxpayers in at least two different tax jurisdictions. Pure unilateral responses to transfer pricing therefore appear ineffective and unable to deliver satisfactory solutions. It is therefore very desirable that research activities in this area be coordinated among different states in order to identify the key elements for further development. In this respect, this monograph provides unique research outcomes that take into consideration specific characteristics of the integrated region of the V4 countries. The Visegrad group countries represent not only a political level of cooperation but also an important business region which is of particular interest to entrepreneurs. As a result, this research project is a much-appreciated contribution to the development of transfer pricing, providing an interesting comparison of four different tax regimes and proposing interesting de lege ferenda solutions. The first part of the monograph addresses the importance of transfer pricing in the international tax system and offers an in-depth review of the bibliography available on the topic. In addition, the authors identify the main focus areas within the worldwide research on transfer pricing and provide an overview of the most important outcomes delivered on the different aspects of transfer pricing. Subsequently the authors describe the chosen methodology together with specification of general and partial aims of the research. The core part of the monograph is introduced by the OECD background to transfer pricing legal regulations and by the EU transfer pricing standards. The monograph then provides a very systematic analysis of the V4 tax jurisdictions. Based on the applied methodology and common internal structure, this part offers a very complex comparison of the respective legal systems, their historical development, the EU legal context and the current transfer pricing regulations. Based on the above it can be concluded that the aims of the monograph and objectives of the research project have been fulfilled. The presented research outcomes extend discussions on the issue of transfer pricing and focusing on the current legal status in V4 countries provide for a very valuable comparative study of transfer pricing aspects in the selected geographic region. The significance of the monograph is further increased by identifying existing risks and by proposals for de lege ferenda considerations. We believe the monograph will raise interest among tax researchers, tax practitioners, tax officials and taxpayers as it provides very sound theoretical grounds for the presented topic and also a very practical tool for comparison of the key structural parts of different transfer pricing regimes. It can also be expected that the presented outcomes will serve as a unique source of inspiration for further research in this interesting and challenging tax area. JUDr. PhDr. Michal Kočiš, PhD. LL.M. Partner – Attorney at law KOČIŠ & PARTNERS s.r.o., Law Firm 10 ACKNOWLEDGEMENTS This monograph represents one of the three main outputs for the project Transfer Pricing in V4 Countries (Visegrad Grant No. 21830038). As the ID specification of the project suggests, this project was co- financed by the governments of Czechia, Hungary, Poland and Slovakia through Visegrad Grants from the International Visegrad Fund, whose mission is to advance ideas for sustainable regional cooperation in Central Europe. In this respect, all the members of the research team would like to express their gratitude and thanks to the support provided and, at the same, declare their hope that the results of this project fulfil the mission of the Visegrad Fund. The authors of the monograph would like to thank the project manager, Mr. Dániel Péter. Dear Dániel, we thank you for your fast responses and willingness to help us. We have appreciated it very much. The project proposal would not have been submitted and this monograph would never have come into existence without first, the stimulus and support provided by prof. Ing. Mária Režňáková, CSc. (at that time, Head of the Department of Finance at the Faculty of Business and Management of the Brno University of Technology, currently, vice-rector at the Brno University of Technology). Support has been continually provided by her successor in the position of Head of the Department of Finance, doc. Ing. Vojtěch Bartoš, Ph.D. As a person responsible for the implementation of the project on the part of the grantee of the project, I would like to express my thanks to them. All the members of the research team would like to express their gratitude to their institutions for their material and financial support connected with this project – namely to the Faculty of Business and Management of the Brno University of Technology (Czech Republic), Faculty of Economics of the Matej Bel University (Slovakia), Kautz Gyula Faculty of Economics of the Széchenyi István University (Hungary), Faculty of Finance and Insurance of the University of Economics in Katowice (Poland) and the DUMA – Dunamenti Adóklaszter (DUMA). In this respect, we reserve a special thank you to the heads of the Faculty of Business and Management of Brno University of Technology and the Faculty of Economics of Matej Bel University where the workshops connected with the project were realised. The information, knowledge and contacts gained therein have been utilised within this monograph preparation. Thus, our special thanks also go to doc. Ing. et Ing. Stanislavav Škapa, Ph.D. (dean of the Faculty of Business and Management) and to doc. Ing. Peter Krištofík, Ph.D. (dean of the Faculty of Economics). The authors of the monograph express thanks to the remaining members of the research team – namely to Mrs. Mariann Berényi (DUMA) and prof. Ing. Jaroslav Ďaďo, Ph.D. (Faculty of Economics of Matej Bel University) – for their contribution to the execution of the project and for their suggestions and comments which helped us to increase the quality of the monograph. Thank you for sharing your knowledge and experience with us. As mentioned above, two workshops were realised in connection with the execution of this project. The members of the research team would like to express their gratitude and thanks to all the participants who attended the workshops and were willing to share their experience, knowledge and opinions or even to discover more about one of the hottest tax issues in the world – transfer pricing. The ideas presented there have been of great value for the monograph. The list of all the participants and the time schedules of the workshops can be found in Annex of this monograph. We declare our separate thanks for the realised presentations to Mr. Daniel Szmaragowvski (KPMG, the Czech Republic); Mr. Vítězslav Kapoun (General Financial Directorate,
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