A & W AG, a company based in Germany, had maintained a permanent establishment in Austria which provided “distribution and support of software” services. No profits had been attributed to the Austrian permanent establishment.
An assessment was issued where profits for FY 1998 to 2002 had been determined by the tax authorities using the cost plus method with a mark up of 9.5% to 7.5% for the years 1998 to 2002.
A & W AG appealed against the tax assessments and argued that a mark up of 2% would be more appropriate.
Judgement of the Court
The Administrative Court of Appeal found the mark up determined by the tax authorities to be incomprehensible.
The tax authority would have had to justify the mark-ups, for example by submitting specific empirical values from comparable companies.
The case was remanded to the court of first instance, where in a decision of April 28, 2010 ( RV/3837-W/09 ), a cost mark-up of 2% was found to be appropriate.
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VwGH 20102009, 2006-13-0116