A Tanzanian branch of Aggreko International Projects Limited, a company incorporated in the United Kingdom, operated in Tanzania in the business of electric power generation, transmission and distribution. For the years of income 2018 and 2019, head office and regional hub costs incurred in Dubai was allocated to its Tanzanian operations on a pro rata basis by reference to revenue generated in each country. These costs were claimed as deductible expenses in computing corporate income tax. Following a audit conducted in 2022, the Revenue Authority disallowed the claimed head office expenses on the basis that the appellant failed to provide documentation demonstrating a clear and verifiable allocation of the costs and failed to prove that the expenses were incurred wholly and exclusively in the production of income in Tanzania as required by section 11(2) of the Income Tax Act. Assessments were issued for both years, ... Continue to full case

The case concerned the valuation of certain intangible assets in connection with a company’s transfer of these assets to a newly established group company. After the transfer, the company was to continue to provide sales and service activities and routine functions relating to the intangible assets to the newly established group company. The company had two transfer pricing valuation reports prepared, both of which used the DCF method to calculate the value of the transferred intangible assets. The reports calculated the value of the entire business, after which the value of the transferred intangible assets was calculated by deducting the value of the routine functions. The required rate of return for the entire business was set at 20%, while the required rate of return for the routine functions was set at 8%. The Danish tax authorities found that the company had submitted proper TP documentation, ... Continue to full case

During tax audits covering the 2008 to 2011 financial years, Société Générale was found to have incurred various expenses for the benefit of foreign subsidiaries. These expenses included costs borne by the head office for staff seconded to subsidiaries, and IT services referred to as ITEC transfer pricing. The expenses were not reinvoiced, or were insufficiently reinvoiced, to the subsidiaries. Although Société Générale reintegrated the amounts into its taxable corporate income, no reimbursement was obtained from the subsidiaries. The tax authorities considered that Société Générale had granted advantages to its foreign subsidiaries by bearing expenses that were incumbent upon them, without adequate consideration. They concluded that this constituted hidden distributions within the meaning of Article 111 of the General Tax Code. As the beneficiaries were non resident entities, the corresponding amounts were subject to withholding tax under Article 119 bis. The administration held that the ... Continue to full case

Aufeer Design s.r.o. is a Czech company that provides design and engineering services, primarily to the automotive industry. The taxable event was the deduction of substantial advertising expenditure incurred in 2015 and 2016 and paid to the advertising agency HERA s.r.o. for displaying Aufeer’s banners at sporting, cultural and social events. Following an audit, the tax authorities questioned the commercial rationale and pricing of these services, treating the relationship with HERA as that between ‘related parties’ under section 23(7)(b)(5) of the Income Tax Act. This was primarily aimed at reducing Aufeer’s corporate income tax base. Additional corporate income tax assessments were issued for 2015 and 2016 after it was determined that the prices agreed with HERA for advertising were many times higher than those charged by event organisers to independent customers. Using prices obtained directly from the organisers and adding what it considered to be ... Continue to full case

De Grisogono Italia s.r.l. is an Italian company that sells luxury watches and jewellery through its boutiques in Rome and Porto Cervo. It purchases jewellery and watches from its Swiss parent company, De Grisogono SA, for resale on the Italian market. For the years 2014–2016, the company documented its transfer pricing using the TNMM with a net cost plus indicator, treating itself as a limited risk distributor. Following a tax audit, the Revenue Agency issued additional tax and VAT assessments for 2014–2016. On transfer pricing, it accepted the use of TNMM but rejected the taxpayer’s profit level indicator and comparables. Using the AIDA database, it built its own set of external comparables and tested De Grisogono Italia’s results with EBIT margins, concluding that the company’s persistent losses showed that the prices paid to the Swiss parent were far from the arm’s length price. The assessments ... Continue to full case

A tax assessment had been issued to J – G Retalho, SGPS, S.A., regarding an arrangement whereby ownership to intangibles had been transferred to a related party in Switzerland and subsequent royalty payments for use of the intangibles had been deducted in the taxable income. In the course of audit of these companies, the tax authorities concluded that the costs in question derive respectively from a contract for the use of the F… brand, sold to that entity for a period of no less than 30 years, and from a contract for the use of the P… brand, also sold to the same Swiss entity, for a period of no less than 30 years, with F… and P… continuing to deduct from their income, costs directly related to the management, promotion and development of the brands they transferred, as well as holding all the risks ... Continue to full case

A Czech distributor within the Eli Lilly group provided marketing services to a related company via a service agreement, applying a cost-plus five per cent remuneration model. For financial years 2013 and 2014, the tax authority refused to allow various costs to be deducted from taxable income on the grounds that the taxpayer had not proven a direct connection between each cost item and the revenues from the service agreement, despite the fact that the company was being remunerated on the basis of its costs. The taxpayer filed a complaint, which was dismissed by the Administrative Court in Prague. An appeal was then filed with the Supreme Administrative Court. Judgment of the Court The Supreme Administrative Court dismissed the appeal and ruled in favour of the tax authorities. The Court held that ‘pricing logic’ under a cost-plus method cannot demonstrate the required direct connection between ... Continue to full case

For the years 2008 to 2016, Tobacco BV was issued multiple tax assessments with significant corrections to the taxable amounts it had declared. In addition, the tax authorities had imposed penalties for misconduct for the years 2010 and 2012 to 2016. For all years, it was disputed whether various fees charged by other group companies for supplies and services to Tobacco BV had been at arm’s length. For 2016, an additional issue arose as to whether the termination of licence rights operated by a subsidiary should be regarded as an unbusinesslike withdrawal from the company’s assets. One of the transfer pricing adjustments concerned the factoring costs charged to Tobacco BV by a group company. The Court ruled that these costs were largely unbusinesslike and that the company had not refuted the presumption under Section 8b of the 1969 Corporation Tax Act, namely that the disadvantage ... Continue to full case

This case concerns a transfer pricing adjustment made to a Panamanian air freight logistics company that is part of a global aviation network. For the 2015 tax year the company provided air freight services and related logistics to its foreign related parties under group agreements, and applied the Transactional Net Margin Method (TNMM) with return on total costs as the profit level indicator. The transfer pricing study treated the Panamanian entity as the tested party and concluded that a 2 percent net margin on total costs was consistent with the arm’s length range derived from nine foreign comparable companies. The intercompany transactions analysed included the provision of air freight services to group companies, reimbursements within the network, commission payments to the group parent for account management, and intra group loans and deposits. For the air freight services the taxpayer applied TNMM on total costs, while ... Continue to full case

Nestlé Zambia Limited (NZL) had made continuous losses during the period in question. Following an audit, the Zambia Revenue Authority (ZRA) issued an assessment adjusting NZL’s income, resulting in additional taxable income. While the Tax Appeals Tribunal found that the ZRA was justified in initiating a transfer pricing audit of NZL, it held that the resulting assessment was invalid due to the ZRA applying inappropriate transfer pricing methods and using comparables from unsuitable jurisdictions. NZL filed a cross-appeal, arguing that the Tribunal had erred in categorising it as a low-risk distributor and that the Tribunal had exceeded its jurisdiction by directing the ZRA to reassess. The ZRA filed an appeal and NZL filed a cross-appeal against the decision of the Tax Appeals Tribunal. In their appeal, the ZRA argued that the Tribunal had misinterpreted the law, incorrectly criticised the ZRA’s use of methods and comparables, ... Continue to full case

SK Rental SAS had filed an appeal against the tax authorities’ transfer pricing adjustment of its 2016 income tax return. The taxpayer argued that the tax authorities’ assessment were irregular and disregarded transfer pricing operations relating to the acquisition of depreciable fixed assets. Along with its claim, the company requested that an expert opinion prepared by Deloitte and a technical analysis by Crowe Co SAS on transfer pricing for 2016 be admitted as evidence. The Administrative Court accepted the documentary evidence and administrative records, but rejected the expert and technical analyses. SK Rental SAS appealed this decision. Judgment The Supreme Administrative revoked the lower court’s order denying the expert and technical evidence and instead decreed their admission. The Court held that, in tax litigation, the valuation of evidence must adhere to the principles of relevancy, pertinency and usefulness. The Court emphasised that expert reports and ... Continue to full case

MC Parts BV mported motorcycle spare parts and accessories from its parent company. It had made an additional payment of €20,091,000 to its parent company based on transfer pricing adjustment to align with the arm’s length principle. The customs authority treated this payment as an increase in the customs value of imported goods and issued an assessment of additional customs duties amounting to €711,221. In an appeal MC Parts BV requested reimbursement of the customs duties, arguing that, as a transfer pricing adjustment, the payment should not be included in the customs value under the transaction value method. It relied on the Hamamatsu judgment of the Court of Justice of the EU, which dealt with lump-sum profit adjustments. Judgment The Court of Appeal examined that precedent but concluded the situations were different. In Hamamatsu, the adjustment was a lump sum not directly tied to goods, ... Continue to full case

In 2018, “ACQ Lender” financed a €16 million acquisition of shares with two loans: €5.75 million from ING Bank at 1.75% variable interest and a similar amount from its British parent company at 5% fixed interest. “ACQ lender” argued that 5% interest on the intra-group loan was the groups standard internal rate. “ACQ Lender” relied on an external CUP study showing a range of 4.69%–7.32%, claiming that the terms of the ING loan differed too much from the intra-group loan. The tax authorities instead applied the internal CUP method, using the ING loan as a comparable, and after making corrections for fixed rate, subordinated nature, and repayment terms, they determined a market rate of 3.32%. The excess interest payments were rejected as a deductible expense, and an assessment of additional taxable income was issued. “ACQ Lender” filed an appeal. Judgment The Court upheld the assessment ... Continue to full case

In 2011, J.C.I. BV took out an 800 million euro loan at an interest rate of 7.22% from J.C.L.F. Sarl (hereafter referred to as ‘J.C.L.F.’), a Luxembourg company that operates through its US branch. Both J.C.I. BV and J.C.L.F. Sarl are part of the J.C. Group. J.C.I. BV repaid the loan in December 2016. As a result, it paid J.C.L.F. interest amounting to €38,025,033.33, corresponding to an annual interest rate of 7.22%. In 2019, J.C.I. BV received a notice of amendment to the corporation tax return for FY 2016. The tax authorities challenged several aspects of J.C.I. BV’s intra-group financing and dividend structures. With regard to transfer pricing, the tax authorities claimed that an interest rate of 7.22% on a 2011 loan exceeded the arm’s length interest rate. They also claimed that certain intra-group arrangements created abnormal advantages and that profits were funnelled through UK ... Continue to full case

“Drilling LDA” had paid approximately €3.95 million in management fees to a related Maltese group company in 2014, under a management services agreement covering administrative, financial, legal and operational support connected with an offshore drilling platform. Following a tax audit, the Tax Authority disallowed tax deductions for the management fees, citing the Portugeese indispensability test for tax deduction of costs, an alleged lack of substance and simulation, and references to transfer pricing. “Drilling LDA” challenged the assessment in the Administrative Court, which overturned the decision. The Tax Authority appealed against this decision to the Central Administrative Court. Judgment The Central Administrative Court dismissed the appeal and confirmed the annulment. The Court held that, once a related-party relationship had been acknowledged, the Tax Authority could not deny deductibility under the indispensability test without properly applying the transfer pricing rules or the anti-abuse regime. As the Administration ... Continue to full case

In 2009 Facebook entered a cost-sharing arrangement, under which the US parent company granted its Irish affiliate the right to use its platform, user base, advertising relationships, and other marketing intangibles in all territories outside the US and Canada. Facebook valued those assets at $6.3 billion, arguing that Ireland’s ongoing share of research costs should be calculated from this figure. The Internal Revenue Service disagreed, asserting that the correct method for valuing the transfer was the ‘income method’. Using its own forecasts, discount rate and licensing benchmark, the IRS concluded that the US assets were actually worth $19.9 billion. Facebook challenged both the figures and the regulations. The company argued that, since both parties had contributed ‘non-routine’ intangibles, the income method was inappropriate. Even if that method had been applicable, Facebook claimed that the IRS had used inflated revenue projections and an unjustified risk premium ... Continue to full case

Alcoa of Australia Ltd. is engaged in mining and sold smelter-grade alumina to an unrelated party, Aluminium Bahrain B.S.C., under long-term contracts. [Australia’s transfer pricing legislation is applicable if an Australian entity gets a tax benefit in Australia from non-arm’s length cross-border conditions, regardless of whether the parties are related to one another. There are no control or ownership thresholds for the legislation to apply. This ensures that independent parties engaging in, for example, collusive behavior or other practices where they are not dealing exclusively in their own economic interests will not circumvent the rules by reason of their non-association.] Following an audit in which the arm’s-length pricing of the transactions was tested using the CUP method, the tax authorities concluded that Alcoa had not received an arm’s-length consideration for its sale of alumina. According to the tax authorities, it had undercharged Aluminium Bahrain B.S.C. by ... Continue to full case

“Retail S.A.” paid for management service fees and royalties for trademarks, know-how and technical assistance to an affiliated company in the Netherlands and deducted these payments in its tax return. To support the tax deductibility of the royalties, “Retail S.A.” submitted a transfer pricing study where it had applied the comparable uncontrolled price method and relied on external comparables. It did not use internal comparables even though the group provided trademark licences to independent third parties in other jurisdictions, arguing that those licensing arrangements were not sufficiently comparable. The tax authorities disallowed both categories of expenses and issued an assessment of additional taxable income. They held that the service contracts lacked specificity, the invoices and documentation were vague and did not establish the actual rendering of services or the benefit to Retail S.A. They further held that the royalties had not been justified as being ... Continue to full case

The dispute concerned various expenses deducted in ΧΑΜΙΩ ΑΒΕΕ’s declared taxable profits for 2013. The tax authority had disallowed several of these, the most substantial being fees for “management services” allegedly rendered under intra-group agreements. The Administrative Court of Appeal upheld the assessment, leading ΧΑΜΙΩ ΑΒΕΕ to file an appeal with the Supreme Administrative Court. In its appeal, the company argued that the tax authority had failed to demonstrate that the disputed expenses were unproductive and that the court had unlawfully shifted the burden of proof to the taxpayer, particularly concerning the management service fees. Judgment The Supreme Administrative Court rejected the appeal and upheld the judgment of the lower court. It ruled that the burden of proving the deductibility and productive purpose of the expenses rested with the taxpayer. In the Court’s view, the invoices and related contracts for the management services lacked adequate ... Continue to full case

The dispute centered on whether management services paid by HAMIOS S.A. to other companies within the group were deductible for tax purposes. The Administrative Court of Appeal had held that the service contracts in question were vague, the supporting documentation insufficient, and that Hamios S.A. had not proven that the services were actually provided or that they related to its business operations. It therefore upheld the assessment disallowing the deduction of management service expenses. An appeal was then filed by Hamios S.A. with the Supreme Administrative Court. Judgment The Supreme Administrative Court dismissed the company’s appeal and upheld the lower court’s judgment. The Court agreed with the reasoning of the Court of Appeal. It emphasized that, under Greek tax law, intra-group service fees must be substantiated with adequate documentation showing that the services were indeed rendered, that they served the needs of the business, and ... Continue to full case