Regulation of transfer pricing by the organisation for economic co-operation and development and its influence on Lithuania

Straipsnyje apžvelgiami pagrindiniai Ekonominio bendradarbiavimo ir plėtros organizacijos ir Lietuvos transakcijų kainodaros reguliavimo ypatumai parodant šios tarptautinės organizacijos rekomendacijų svarbą Europos Sąjungos valstybių narių, iš jų ir Lietuvos, teisiniam reguliavimui. Nagrinėjant Ekonominio bendradarbiavimo ir plėtros organizacijos aktus ir juos lyginant su Lietuvos aktais, skirtais transakcijų kainodarai, atskleidžiami jų trūkumai.The article deals with fundamentals of transfer pricing regulation by the OECD and Lithuania. Firstly, the Model Convention of the OECD is presented. Secondly, the rules of the OECD Transfer Pricing Guidelines for Multinational and Tax Administrations (hereinafter the Guidelines) and Lithuanian legal acts on transfer pricing are analysed and the comparison of them is being made. OECD issued the first Model Double Taxation Convention (hereinafter the MDTC) in 1963, which Was reviewed on several occasions. The provisions of the above convention are often followed by the states including but not limited to Lithuania while concluding their double taxation conventions. Although Article 9 docs not deal directly with transfer pricing, it forms the basis for evolution of arm's length principle. Following the interest of tax administrations in transfer pricing after the adoption of the MDTC the OECD issued the Guidelines which provide detailed recommendations on various aspects of transfer pricing, e.g. requirements for comparability of the transactions and documentation kept by the enterprise, transfer pricing methods. Transfer pricing rules are relatively new to the Lithuanian law. The rules approved by Finance Minster Order of 9 April 2004 provide the implementing provisions of the provisions on the transfer pricing included into the Corporate Tax Law as of 1 January 2002 and into Natural Persons' Income Tax Law as of 1 January 2003. The above rules are drafted following the above-mentioned OECD guidelines; nevertheless certain shortcomings could be established, such as the preference of internal transactions for comparison and unclear distribution of burden of proof