The transfer pricing penalties applied in EU countries are analysed in the article. The authors recommend the transfer pricing determination and imposition methodology which could be applied in EU countries as well as in countries where the transfer pricing requirements are based on the OECD transfer pricing guidelines. The authors recommend setting the penalty taking into account: 1) the difference of income tax rates in countries where the transaction parties are acting; 2) value of the transaction; 3) the difference between the arm’s length price and the transfer price; 4) the risk multiplication factor.