EU cooperative compliance project for transfer pricing announced


The European Commission (EC) has recently published guidelines on the European Trust and Cooperation Approach (ETACA), a pilot project on cooperative compliance within the EU specifically focusing on transfer pricing risks for large multinationals. 

The ETACA pilot was already announced in the Action Plan for fair and simple taxation supporting the recovery strategy (see also PwC Tax Policy Alert). It will function alongside the International Compliance Assurance Project (ICAP) organised at the level of the Forum on Tax Administration (FTA) and multiple domestic cooperative compliance programmes (such as the Belgian Co-operative Tax Compliance Programme). Whilst the scope of ETACA is limited to transfer pricing for large multinationals, a separate pilot was also announced for small and medium sized enterprises (SMEs). The Fiscalis Group is still working on this other pilot whereby it is the intention that tax administrations solve together, in a preventive manner, cross-border tax issues faced by SMEs operating within the EU.  

As with any other cooperative compliance arrangement, ETACA will not offer the legal certainty that a taxpayer may have with unilateral, bilateral or multilateral APAs. It is rather aimed at giving assurance to taxpayers that certain transactions bear a low tax risk given the specific facts and circumstances of the taxpayer. If such low tax risk is the outcome of the risk review by the tax administrations involved, participating administrations do not anticipate dedicating resources to a further review if facts and circumstances remain the same. 

Benefits to the taxpayer 

Access to the ETACA pilot allows eligible taxpayers to explain to the participating tax authorities the relevant data, policy and business/TP model in a proactive, non-adversarial and constructive setting. An informed decision on the risk review from several tax authorities is gathered in a relatively short time frame (target period of 36 weeks). Generally, the procedure under this time frame could be faster than other available procedures such as bilateral or multilateral advance pricing arrangements. Further, it may reduce the likelihood of audit procedures in each of the countries concerned which in turn reduces disputes in those countries and/or the number of MAP cases.


The programme is intended for multinational enterprises (MNE) with a global total consolidated group revenue above Euro 750 million and whose Ultimate Parent Entity (UPE) is located within the EU. Transactions with related entities outside the EU can be covered if relevant for the participating tax authorities, but assurance can only be provided from the EU tax authorities.  

Access to the programme is voluntary. Extension to MNE with UPE outside EU can be considered after the pilot. MNE with a global total consolidated group revenue lower than Euro 750 million may also be considered to be accepted in the pilot under the condition they provide the same information as contained in the Country-by-Country Report. 

Other eligibility factors to be considered by MNEs before applying include:

  • The footprint of the MNE and the volume and materiality of a MNE’s covered transactions within the EU;  
  • The past behaviour of the taxpayer in terms of tax compliance (i.e. the taxpayer should not have incurred a serious penalty as a consequence of tax fraud, repeated willful default and repeated gross negligence); 
  • A commitment of the taxpayer to engage cooperatively and transparently throughout the process;  
  • Existence of an internal tax control framework (i.e. a set of processes and internal control procedures ensuring that a company has identified its tax risks and adequately controls and monitors these risks).

Focus of the pilot

In principle, the programme focuses on performing a common and multilateral risk assessment with regard to transfer pricing risks for routine transactions in the EU under a one-sided TP method. Reference is explicitly made to limited risk distribution, contract manufacturing and intragroup services as examples of transactions which may be covered.  

There is however an expectation that an MNE participating will disclose all relevant intra-group transactions and its value chain so that there is a comprehensive understanding of the business and TP policy .  

The ETACA guidelines on the other hand advocate a flexible approach and mention that non-routine transactions (e.g., transactions involving intangibles or business restructurings) could also be part of the risk review process but state that this is to be assessed on a case-by-case basis and that this subject to acceptance by the relevant tax administrations. 

How does it work?

The program requires a transparent and cooperative relationship between the MNE and the tax authorities concerned. 

ETACA applies the one-stop shop principle: as a rule the UPE contacts its tax administration which will in principle act as coordinating tax administration authority with the other participating tax administrations. A surrogate coordinating tax administration is possible under certain circumstances.

The following countries already formally committed to participate in ETACA: Austria, Belgium, Portugal, Germany, Slovak Republic, Italy and Finland. It is the expectation that other EU Member States will follow later on and that they will also consider participating when asked by a lead tax administration of a UPE. 

Like other cooperative compliance arrangements, it contains several phases: the admission phase, the risk assessment phase and the outcome phase.

Under the admission phase, an interested MNE submits a pre-defined documentation package as a start to the coordinating tax administration. During the admission phase a kick-off meeting is held to select participating tax administrations, the covered transactions and the relevant period.

Admittance to ETACA is not a right of the taxpayer. Nevertheless, where tax administrations decide not to pursue a taxpayer’s application, they should endeavour to give an explanation outlining the reasons for this decision, such as already existing APAs, ongoing disputes, insufficient quality of the TCF, etc.

Under the risk assessment phase, the participating tax authorities endeavour to agree on a common approach in assessing the tax risks in the covered transactions, preferably on the basis of pre-agreed steps. This includes review of the documentation, functional analysis, coherence review of the TP methodology, The aim of this phase is to conclude whether the covered transactions represent a low tax risk or not. At the end of the risk assessment phase (time frame estimated of 20 weeks), the participating tax administrations after having consulted each other and having endeavoured to reach a common understanding of the level of tax risk, communicate their feedback and the outcome of their review. . 


During the outcome phase, the UPE is officially informed of the risk assessment by way of an outcome letter and final summary report signed by all participating tax administrations. In case of differences in risk appreciation, taxpayers can expect to obtain insights in the reasons for different risk appreciation. 

Taxpayers receiving a “no-low tax risk” outcome can adjust their policy for future years if desired and appropriate. 

Taxpayers receiving a “low tax risk” outcome can have genuine expectations (although not guaranteed) that these covered low tax risk transactions will not lead to further in-depth scrutiny for the covered period and the 2 subsequent fiscal years if there are no changes in facts and circumstances.  

The entire process is estimated between 28 and 36 weeks, so the pilot programme has the features to be a relatively swift and resource-efficient avenue to seek a certain level of multilateral comfort on your TP policy. 

For more details or a discussion if ETACA is a useful instrument in view of your Tax Controversy Management strategy, please contact Bram Markey.