Transfer pricing (Fr.: Prix de transfert, Ro.: Prețuri de transfer) (See also 'on an arm length' principle, competition law, tax law)  =  the price practiced for the sale of goods and services between associated or linked enterprises, members of the same group. If one entity from the group sells a good to a division of the same group the price of this sale is known in international taxation as ‘transfer price’. 

This economical operation must respect the offer and demand rule. In other words, this price must be the market value of the good/service/share etc. even if the buyer is an affiliated or a third party. Otherwise, accounting problems will arise and the national financial authorities will interfere to re-establish the true price.

The sale’s price should respect the ‘at an arm length’ principle. According to this principle one of the parties from the same entity settled for a price, this must be the same that the buyer would have practiced with an independent entity. When two enterprises are part of the same corporate group they tend ‘hug each other’ or to make discounts, concessions which are not allowed by the market. They would not have the same behaviour with an independent corporation. In order to protect the market the price should be the same or equivalent.

At international level, the Organisation for Economic and Co-operation Development (OECD) adopted various regulations and guidelines to help its members align their national tax legislation to the Model Convention on Income and Capital. Even if these are only orientating measures, most states copied these provisions.

The Council of the European Union adopted in 2006 a Code of Conduct on transfer pricing documentation for associated enterprises in European Union. As it is stated in the preamble this was a political measure to protect the internal market and the transactions between entities located in different Member States. This Code of Conduct applies only between corporations located in two Member States of the EU. For third parties national tax law and the OECD Model Convention, guidelines and regulations will the applied. 


Useful links

Legislation – Romanian Tax Code article 19 par. 5 [Romanian] - Romanian National Financial Administration Order regarding the procedure of the transfer pricing file [ Romanian ] Resolution of the Council and of the representatives of the governments of the Member States, meeting within the Council, of 27 June 2006 on a code of conduct on transfer pricing documentation for associated enterprises in the European Union (EU TPD) Romanian Legislation on Transfer Pricing [ Romanian ] OECD Model Convention with respect to taxes on income and capital - 

Organisations and associations Organisation for Economic Co-operation and Development EU Joint Transfer Pricing Forum (JTPF) assists and advises the European Commission on transfer pricing tax matters.

Case law

Bombay High Court, Vodafone Ltd v Indian Tax Authorities, 2015, United States Court of Appeal for Circuit District, Banker`s Trust New York Corporation and Colsidated Subsidiaries v United States, 2000, United States District Court For the Southern District of Texas, Huston Division, United States of America, v. John Cox, Tax Director of BMC Software and Subsidiaries, 1999, United States Tax Court Boieng Co. Et Al. v. United States, 2003, United States Court of Appeal for the Ninth Circuit, DHL Incorporated and Subsidiaries v. Commissioner of Internal Revenue, 2002, Supreme Court of Canada, Canada v. GlaxoSmithKline Inc, 2012, Supreme Court of Canada, Shell Canada Ltd. v. Canada, 1999, Federal Court of Appeal, Singleton v. Canada, 2001

Online Publications - Romanian National Financial Administration, 2014, Romania - Country Profile - Transfer Pricing presentation, Romania - Organisation for Economic Co-operation and Development (OECD), 2008, OECD Guidelines for Multinational Enterprises, France, Paris, OECD Publishing - Direction Générale des Impôts et des Domaines du Sénégal, Transfer Pricing Perspectives in Senegal, online ppt - European Commission, 2001, Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee - Towards an Internal Market without obstacles. A strategy for providing companies with a consolided corporate tax base for their EU-wide activities, Belgium, Brussels - United Nations, 2013, Practical Manual on Transfer Pricing for Developing Countries, USA, New York, UN Publishing


Feinschreiber, R., 2004, Transfer Pricing Methods: An Application Guide, Fist Edition, USA, Wiley

Bakker, A., 2009, Transfer Pricing and Business Restructuring: Streamlining All the Way, Amsterdam, The Netherlands, IBFD

Markham, M., 2005, The Transfer Pricing of Intangibles, The Hague, The Netherlands, Kluwer Law International

Bakker, A., Levey, M., Marc, 2012, Transfer Pricing and Intra-group Financing: The Entangled World of Financial Markets and Transfer Pricing, Amsterdam, The Netherlands, IBFD

Yunker, J., Penelope, 1982, Transfer Pricing and performance evaluation in multinational corporations: a survey study, Praeger

Sim, S., 2014, The Logic and Practice of Transfer Pricing, LexisNexis

Schon, W., Konrad, A. Kai, 2012, Fundamentals of International Transfer Pricing in Law and Economics, Max Planck Institute for Tax Law and Public Finance, Springerlink


By Daniela Ghicajanu