TP adjustment may also be a consequence of the fact that at the time of defining the transfer price, the taxpayer did not have available information on comparable uncontrolled transactions. Therefore, TP adjustment allows the taxpayer to "correct" the difference between the price originally charged and the price that is considered to be in accordance with the “arm’s length principle", for the purpose of paying an adequate amount of income tax. One of the most significant risks when implementing a TP adjustment is that it can lead to double taxation (disagreement between two tax jurisdictions regarding the implementation of the adjustment).According to general rules (EUJTPF), TP adjustment should be accepted if the following conditions are met:
- The taxpayer made reasonable efforts in order for price to be in accordance with the "arm's length principle" before and during the controlled transaction (i.e., the taxpayer defined the transfer price based on the available information at the moment);
- Adjustment was carried out symmetrically in both tax jurisdictions (e.g., revenues to one company, expenses to the other in the same amount);
- The taxpayer has a consistent transfer pricing policy;
- The taxpayer carried out the adjustment before submitting the tax balance;
- If one of the jurisdictions requires, the taxpayer is obliged to explain the difference between the market price and price charged in the controlled transaction.
In addition to the TP adjustment that is carried out in two or more jurisdictions, taxpayers in Croatia and Serbia can implement TP adjustment through the tax balance (one-sided). Overview of methods how TP adjustments are carried out in Croatia and Serbia is given below.