Pgnig Upstream Norway AS (PUN) sold dry gas to its sister company (PST). According to the tax authorities the price for the gas had not been determined at arm’s length, cf. Section 13-1, first paragraph, of the Tax Act, and an assessment of additional income was issued. Judgement of the Court The Court decided in favour of the tax authorities. It found that the tax authorities had correctly concluded that there was a reduction in PUN’s income, and that the reduction was due to parties being under common control. The key point for the Court was that there was an imbalance in the functional profiles of PUN and the sister company, PST. Through certain deductions in the purchase price, PUN had indirectly been charged for parts of the sister company’s downside risk, without being allowed a share in potential upside profits. Excerpts “(…)In any event, ... Continue to full case

The case concerned pricing of the wet gas in FY 2012-2014 sold between Equinor Energy (subsidiary) and Equinor ASA (parent). The intra-group sales from Equinor Energy to Equinor were regulated by an internal agreement that was entered into as part of the transfer of rights in 2009. The income that Equinor Energy receives from the internal sales is subject to section 5 of the Petroleum Tax Act with a special tax that comes in addition to the general income tax. This means that Equinor Energy had a total tax burden of 78%. Equinor, for its part, is charged with ordinary income tax, which was 27/28%. In 2012 the pricing model was changed rom the so-called “OTS price model” to a “dividend model”, which led to the price (and taxable income in Equinor Energy) being reduced compared to the previously used pricing model. The reason stated by ... Continue to full case

Poltova GZK is a Ukrainian subsidiary of the Ferrexpo group – the world’s third largest exporter of iron ore pellets. In FY 2015 the iron ore mined in Ukraine by Poltava GZK was sold to other companies in the group – Ferrexpo Middle East FZE, and the transfer prices for the ore was determined by application of the CUP method using Platts quotations. However, according to the tax authorities Poltava GZK used Platts quotations for pellets with a lower iron content when pricing the higher quality pellets, resulting in non arm’s length prices for the controlled transactions and lower profits in the Ukraine subsidiary. The tax authorities also found that Poltava GZK had overestimated the cost of freight – in the case of actual transportation of pellets by ships of different classes (“Panamax”, “Capesize”), the adjustment of the delivery conditions was carried out only at ... Continue to full case

Cargill Argentine SA channelled 98% of its commodity exports through a branch in Uruguay. Cargill Argentine SA invoiced the exports to the branch, but shipped the goods directly to the customers. The prices charged by the branch to its customers could be the same, lower or higher than the price charged by Cargill Argentine SA to the branch, hence it would assume the price risks from the time of purchase from Cargill Argentine SA until the final sale to each customer. Following an audit, the Argentine Revenue Service issued a transfer pricing assessment for FY 2000 to 2003. According to the tax authorities the pricing of the transactions between Cargill Argentine SA and the Branch in Uruguay had not been at arm’s length. Instead of pricing the commodities on the contract date, the tax authorities priced the transactions on the date of shipping – based ... Continue to full case

The question in the case was whether a Norwegian company had received an arm’s length price when selling gas to a French company in the same group. Judgement of the Court of Appeal The Court of Appeal came to the conclusion that the agreed transfer price had not been at arm’s length and this meant a reduction in income for the Norwegian company. The Appeal Board for Petroleum Tax’s decision was upheld.  Click here for English translation. Click here for other translation ... Continue to full case

The tax authorities had adjusted the agreed prices of agricultural commodities transferred by ADM Argentina to a foreign related party. Following receipt of the additional income assessment, ADM Argentina appealed to the Federal Tax Court. The Federal Tax Court overturned the assessment. The court concluded that the adjustments made by the tax authorities were arbitrary because they were made only in respect of certain export transactions where the quoted price at the time of the transaction was lower than the quoted price at the time the goods were loaded. Furthermore, the transactions used by the tax authorities as external comparables were not valid for transfer pricing purposes because they suffered from significant comparability flaws and deficiencies. The Court of Appeal later upheld the Federal Tax Court’s decision and the Supreme Court dismissed a final appeal by the tax authorities. Excerpts “On the basis of these ... Continue to full case

Malteria Pampa S.A in Argentina exported malt to a related intermediary in Uruguay that in turn sold on the goods to the brewery in Brazil at a higher price. The tax authorities applied the Sixth method and issued an assessment where the export price was determined based on the latter price used in the transaction with the brewery in Brazil. Furthermore a substantial fine was issued to the Malteria Pampa S.A. for non compliance. In February 2019 the Tax Court decided in favour of the tax authorities. “That the factual and legal points considered by the customs verification – corroborated in this pronouncement – complied with the application parameters of the TP rules invoked in the Technical Report, forming a solid conviction that the transactional prices of the sale declared in the field “Merchandise Value” of the PE 07-003-EC01-004994-P and PE N° 07-003- EC01-004995-Z of ... Continue to full case

At issue is the selection of the most appropriate transfer pricing method for sale of coal mined by Carbones El Tesoro S.A. in Colombia to its related party abroad, Glencore International AG. Carbones El Tesoro S.A. had determined the transfer price by application of the TNMM method. The tax authorities found that the most appropriate method for pricing the transactions was the CUP method. To that end, the tax authorities applied a database (McCloskey price list) in which the price, was determined by referring to a good similar to that traded (thermal coal) and to the Btus (British Thermal Unit) thereof. On 29 April 2011, the Settlement Management Division of the Barranquilla Regional Tax Directorate issued an assessment by which it modified the income tax return for the taxable year 2007, in the sense of disregarding as a net loss for the year the amount ... Continue to full case

Ukrainian company “PJSP Gals-K” had been involved in various controlled transactions – complex technological drilling services; sale of crude oil; transfer of fixed assets etc. The tax authority found, that prices had not been determined in accordance with the arm’s length principle and issued a tax assessment. Gals-K disagreed and filed a complaint. The Administrative Court dismissed the tax assessment and this decision was later upheld by the Administrative Court of Appeal. Judgement of the Supreme Administrative Court The Supreme Court set aside the decisions of the Court of Appeal and remanded the case to the court of first instance for a new hearing. The court considered that breaches of procedural and substantive law by both the Court of Appeal and the Court of First Instance have been committed, and the case should therefore be referred to the Court of First Instance for a new ... Continue to full case

Nidera S.A. exported commodities (cereals, oilseeds etc.) via group traders domiciled on the British Virgin Islands. In the absence of evidence to the contrary, in transactions involving entities domiciled in low-tax jurisdictions, it was presumed that prices had not been agreed in accordance with the arm’s length principle. The tax authorities issued an adjustment by applying the “CUP” method (Sixth method), considering the statistical average prices set as a reference value by the National Secretariat of Agriculture, Livestock and Fisheries, corresponding to the date of shipment (and not to the date of agreement as claimed by the claimant). However adjustments were only made to those transactions where the quoted price was higher than the one agreed by Nidera S.A. An appeal was filed with the National Court by Nidera S.A. In 2016 the National Court of Appeals issud ist decision in the case. The decision ... Continue to full case

Glencore Australia (CMPL) sold copper concentrate produced in Australia to its Swiss parent, Glencore International AG (GIAG). The tax authorities found, that the price paid by Glencore International AG to Glencore Australia for the copper concentrate in the relevant years according to a price sharing agreement was less than the price that might reasonably be expected to have been paid in an arm’s length dealing between independent parties. The tax assessment was brought to court by Glencore. The Federal Court of Australia found in favor of Glencore. The ruling of the Federal Court was appealed by the Australian tax authorities. On 6 November 2020, a Full Federal Court in a 3-0 ruling dismissed the appeal of the tax authorities. The tax authorities then submitted a application for special leave to the High Court. This application was dismissed by the Court in a judgement issued 20 ... Continue to full case

Cameco, together with its subsidiaries, is a large uranium producer and supplier of the services that convert one form of uranium into another form. Cameco had uranium mines in Saskatchewan and uranium refining and processing (conversion) facilities in Ontario. Cameco also had subsidiaries in the United States that owned uranium mines in the United States. The Canadian Revenue Agency found that transactions between Cameco Corp and the Swiss subsidiary constituted a sham arrangement resulting in improper profit shifting. Hence, a tax assessment was issued for FY 2003, 2005, and 2006. Cameco disagreed with the Agency and brought the case to the Canadian Tax Court. In 2018 the Tax Court ruled in favor of Cameco and dismissed the assessment. This decision was appealed by the tax authorities to the Federal Court of Appeal. The Federal Court of Appeal in 2020 dismissed the appeal and also ruled ... Continue to full case

Azot is a producer of mineral fertilizers and one of the largest industrial groups in Ukraine. Following an audit the tax authorities concluded that Azot’s export of mineral fertilizers to a related party in Switzerland, NF Trading AG, had been priced significantly below the arm’s length price, and moreover that Azot’s import of natural gas from Russia via a related party in Cyprus, Ostchem Holding Limited, had been priced significantly above the arm’s length price. On that basis, an assessment of additional corporate income tax in the amount of 43 million UAH and a decrease in the negative value by 195 million UAH was issued. In a decision from 2019 the Administrative Court ruled in favor of the tax authorities. This decision was then appealed by Azot to the Supreme Administrative Court. The Supreme Administrative Court dismissed the appeal and decided in favor of the ... Continue to full case

The disputed issue concerns the purchase prices of natural gas by SC A from an affiliated company SC B. By orders of the National Energy Regulatory Authority (NERA), the prices of supply of natural gas to domestic and non-domestic consumers were regulated and fixed, but not the price at which SC A purchased it from the SC B. The tax authority issued an assessment where the price of the controlled gas transaction was determined by reference to profit level indicators of comparable businesses. SC A brought the decision to the Romanian courts. Judgement of the Court of Appeal The appeal of SC A was dismissed and the assessment of the tax authorities upheld. Excerpt “In the present case, in order to adjust the expenses for the cost of the goods purchased from SC “B.” SRL, based on the level of the central market trend, the ... Continue to full case

Glencore Australia (CMPL) sold copper concentrate produced in Australia to its Swiss parent, Glencore International AG (GIAG). The tax administration found, that the price paid by Glencore International AG to Glencore Australia for the copper concentrate in the relevant years according to a price sharing agreement was less than the price that might reasonably be expected to have been paid in an arm’s length dealing between independent parties. ‘The amended assessments included in the taxpayer’s assessable income additional amounts of $49,156,382 (2007), $83,228,784 (2008) and $108,675,756 (2009) referable to the consideration which the Commissioner considered would constitute an arm’s length payment for the copper concentrate sold to Glencore International AG in each of the relevant years. The Federal Court of Australia found in favor of Glencore. “Accordingly I find that the taxpayer has established that the prices that CMPL was paid by GIAG for the ... Continue to full case

On 23 September 2020, the Federal Administrative Court in Mexico issued a not yet published decision in a dispute between the Mexican tax authorities (SAT) and Canadian mining group First Majestic Silver Corp’s Mexican subsidiary, Primero Empresa Minera. The court case was filed back in 2015 by the tax authorities, to cancel an Advance Pricing Agreement (APA) issued to Primero Empresa Minera back in 2012. According to the APA, a methodology had been determined allowing the Mexican mining company to sell silver at 4.04 dollars per ounce to a group company based in Barbados (Silver Trading Barbados Ltd) via Luxembourg, when the average market price of silver was above 30 dollars. The APA was applied by Primero Empresa Minera for FY 2010 – 2014. The Federal Court decided in favor of the tax authorities that the APA was invalid and therefore nullified. After receiving the ... Continue to full case

Cameco, together with its subsidiaries, is a large uranium producer and supplier of the services that convert one form of uranium into another form. Cameco had uranium mines in Saskatchewan and uranium refining and processing (conversion) facilities in Ontario. Cameco also had subsidiaries in the United States that owned uranium mines in the United States. In 1993, the United States and Russian governments executed an agreement that provided the means by which Russia could sell uranium formerly used in its nuclear arsenal. The net result of this agreement was that a certain quantity of uranium would be offered for sale in the market. Cameco initially attempted to secure this source of uranium on its own but later took the lead in negotiating an agreement for the purchase of this uranium by a consortium of companies. When the final agreement was signed in 1999, Cameco designated ... Continue to full case

Following an audit of Mopani Copper Mines Plc. the Zambian Revenue Authority (ZRA) found that the price of copper sold to related party Glencore International AG had been significantly lower than the price of copper sold to third parties. A tax assessment was issued where the ZRA concluded that the internal pricing had not been determined in accordance with the arm’s length principle, and further that one of the main purposes for the mis-pricing had been to reduce tax liabilities. Mopani Copper Mines Plc. first appealed the decision to Zambia’s Tax Appeal Tribunal, and after a decision was handed down by the Tribunal in favor of the ZRA, a new appeal was filed with the Supreme Court. The Supreme Court dismissed Mopani’s appeal and ruled in favor of the ZRA ... Continue to full case

BHP Billiton Ltd, an Australian resident taxpayer, is part of a dual-listed company arrangement (“the DLC Arrangement”) with BHP Billiton Plc (“Plc”). BHP Billiton Marketing AG is a Swiss trading hub in the group which, during the relevant years, was a controlled foreign company (CFC) of BHP Billiton Ltd because BHP Billiton Ltd indirectly held 58 per cent of the shares in the Swiss trading hub. BHP Billiton Plc indirectly held the remaning 42 per cent. The Swiss trading hub purchased commodities from both BHP Billiton Ltd’s Australian subsidiaries and BHP Billiton Plc’s Australian entities and derived income from sale of these commodities into the export market. There was no dispute that BHP Billiton Marketing AG’s income from the sale of commodities purchased from BHP Billiton Ltd’s Australian subsidiaries was “tainted sales income” to be included in the assessable income of BHP Billiton Ltd under ... Continue to full case

In the case of Ajalyk Trade LLC, the Supreme Court ruled in favour of the tax authorities, confirming the legality of the tax adjustment. The court held, that if the quantity and price of goods are determined in the specifications of the contract and/or in additional agreements, the contract cannot be considered a forward contract for tax purposes. As a result, the taxpayer cannot compare prices in controlled transactions with prices in comparable uncontrolled transactions at the time where such an agreement is concluded. Click here for English translation Click here for other translation ... Continue to full case