EU Blacklist Puts Transfer Pricing Under Scrutiny

The European Union (EU) has placed 17 countries on a tax haven blacklist. If you conduct business in one or more of these countries, your transfer pricing will be under scrutiny.

The 17 countries on the EU list are American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, the Marshall Islands, Mongolia, Namibia, Palau, Panama, St Lucia, Samoa, Trinidad & Tobago, Tunisia and the United Arab Emirates.

Panama, South Korea and the UAE were all placed on the list of non-compliant jurisdictions. Countries that have indicated they will make reforms—including Switzerland, Turkey and Hong Kong—were added to a so-called “grey list.”

This blacklist along with the widely adopted base erosion and profits shifting (BEPS) measures highlight the importance for multinational entities (MNEs) conducting business in any of these countries to have in place robust and compliant transfer pricing policies and documentation. Ensuring that their transfer pricing is robust allows MNEs to prove that their intercompany transactions are truly at arm's length and reflective of the value chain within their businesses.