Nestlé Zambia had reported continuous losses for more than five years. Following an Transfer Pricing audit covering years 2010 – 2014, the tax administration issued an assessment whereby profits were adjusted to ZMW 56,579,048 resulting in additional taxes of ZMW13,860,103 plus penalties and other levies. The assessment was based on Nestlé Zambia being characterised as a limited risk distributor instead of a full fledged dristributor. Nestlé Zambia held that the tax administrations characterisation of the entity as a limited risk distributor was incorrect and that the assessment had not been performed in accordance with the arm’s length principle. The Tribunal ruled in favor of Nestlé, except for it’s position on the characterisation of the entity as a limited risk distributor (ground four cf. the excerp below). “The summary of our findings is that there was basis for initiating a transfer pricing audit in this case because as ...
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