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Argentina vs Bayer Argentina S.A., March 2024, Supreme Court, Case No CAF 34007/2019/1/RH1

Posted on March 12, 2024 | By Courts of Argentina | No comments

Category: Benchmark, Range and Median, Transfer Pricing Methods | Tag: Chemicals, Interquartile range (IQR), Most appropriate method (MAM), Non-retroactivity of rules, Statistical tools, Transactional net margin method (TNMM), Transfer pricing legislation

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The tax authorities had applied the TNMM and used the interquartile range and median to determine the arm’s length income of Bayer Argentina S.A. for FY 1999 and this resulted in a tax assessment being issued where the taxable income had been adjusted upwards.

Not satisfied with the assessment Bayer Argentina S.A. filed a complaint.

Both the Tax Court and later the National Court set aside the assessment and decided in favour of Bayer Argentina S.A.

An appeal was then brought by the tax authorities before the Supreme Court.

Judgment of the Supreme Court

The Supreme Court upheld the decision of the National Court and decided in favour of Bayer Argentina S.A.

According to the Court, the application of the interquartile range used by the tax authorities to support the assessment of additional taxable income for FY 1999 was inadmissible, since the median and interquartile range was not applicable in the period and a contrary conclusion would seriously undermine legal certainty and would imply disregarding the need for the State to clearly prescribe the taxes and exemptions, so that taxpayers can easily adjust their respective conduct in tax matters.

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Related Guidelines

TPG2022 Chapter III paragraph 3.62In determining this point, where the range comprises results of relatively equal and high reliability, it could be argued that any point in the range satisfies the arm’s length principle. Where comparability defects remain as discussed at paragraph 3.57, it may be appropriate to use measures of central tendency to...

TPG2022 Chapter III paragraph 3.61If the relevant condition of the controlled transaction (e.g. price or margin) falls outside the arm’s length range asserted by the tax administration, the taxpayer should have the opportunity to present arguments that the conditions of the controlled transaction satisfy the arm’s length principle, and that the result falls within...

TPG2022 Chapter III paragraph 3.57It may also be the case that, while every effort has been made to exclude points that have a lesser degree of comparability, what is arrived at is a range of figures for which it is considered, given the process used for selecting comparables and limitations in information available on...

TPG2022 Chapter I paragraph 1.9The arm’s length principle has also been found to work effectively in the vast majority of cases. For example, there are many cases involving the purchase and sale of commodities and the lending of money where an arm’s length price may readily be found in a comparable transaction undertaken by...

TPG2022 Chapter II paragraph 2.112A similar approach may be required when there are differences in functions performed by the parties being compared. Assume that the facts are the same as in the example at paragraph 2.44 except that it is the comparable independent enterprises that perform the additional function of technical support and not...

TPG2022 Chapter II paragraph 2.111By way of illustration, the example of cost plus at paragraph 2.59 demonstrates the need to adjust the gross mark-up arising from transactions in order to achieve consistent and reliable comparison. Such adjustments may be made without difficulty where the relevant costs can be readily analysed. Where, however, it is...

TPG2022 Chapter II paragraph 2.110See in particular paragraphs 3.18-3.19 for guidance on the tested party, paragraphs 3.55-3.66 for guidance on the arm’s length range, and paragraphs 3.75-3.79 for guidance on multiple year data....

TPG2022 Chapter II paragraph 2.109While it is not specific to the transactional net margin method, the issue of the use of non-transactional third party data is in practice more acute when applying this method due to the heavy reliance on external comparables. The problem arises because there are often insufficient public data to allow...

TPG2022 Chapter II paragraph 2.108A situation where Berry ratios can prove useful is for intermediary activities where a taxpayer purchases goods from an associated enterprise and on-sells them to other associated enterprises. In such cases, the resale price method may not be applicable given the absence of uncontrolled sales, and a cost plus method...

TPG2022 Chapter II paragraph 2.107The selection of the appropriate financial indicator depends on the facts and circumstances of the case, see paragraph 2.82. Concerns have been expressed that Berry ratios are sometimes used in cases where they are not appropriate without the caution that is necessary in the selection and determination of any transfer...

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