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

Gruppo Illy and its subsidiary Domori received a tax assessment in which the tax authorities had adjusted the pricing of goods sold by Domori to Agriland under application of the Italian arm’s length provision. During the relevant period, Domori had incurred losses. According to the tax authorities, two Agriland directors were also Illy Group directors, and on this basis, the tax authorities held that the transactions were controlled under the definition found in Article 110 of the TUIR (the Italian arm’s length provision). Illy and Domori contested the assessment by filing an appeal, as Agriland was neither part of the group nor otherwise controlled by them. The Provincial Tax Commission cancelled the assessment, a decision which was later upheld by the Regional Court. An appeal was then filed with the Supreme Court. Judgment The Supreme Court upheld the Regional Court’s decision and set aside the ... Continue to full case

SASU A. Menarini Diagnostics France, a French subsidiary of the Italian Menarini Group, purchases and resells diagnostic equipment and self-diagnosis products, as well as products for laboratories. Since its inception, the company had consistently reported operating losses, despite each business line being profitable, regardless of sales trends, and even though the company was no longer in a market penetration phase. The French tax authorities conducted an audit for fiscal years 2011 to 2013, which concluded that the intra-group transaction prices were not at arm’s length. The audit found that the company had overpaid for products purchased from two related Italian entities, resulting in an indirect transfer of profits within the meaning of Article 57 of the French General Tax Code. A. Menarini Diagnostics France challenged the tax adjustment before the Montreuil Administrative Court, which rejected its request for relief. A subsequent appeal before the Administrative ... Continue to full case

The tax authorities had assessed the income of DHL Forwarding (Norway) AS for the years 2014-2019, and increased the income by a total of NOK 242 million, pursuant to Section 13-1 of the Taxation Act containing the Norwegian arm’s length provisions. An appeal was filed by DHL Global Forwarding (Norway) AS with the District Court, which later ruled in favour of DHL finding that the conditions for an assessment were not met. The tax authorities then appealed to the Court of Appeal. Judgment The Court of Appeal upheld the decision from the District Court and likewise found that the conditions for discretionary assessment were not met. It had not been substantiated that the company’s income had been reduced due to a common of interest with the DHL Group. It had not been demonstrated that the pricing of transactions between the company and the Group was ... Continue to full case

“Car Lrd Corp” operated as a limited risk distributor, importing and selling finished vehicles and auto parts from related parties. It applied the TNMM with operating profit margin as the profit level indicator, but incurred substantial losses between 2017 and 2021, largely because regulatory issues led to a temporary suspension of sales. To address the downturn, the subsidiary undertook market penetration measures and recorded high selling, general and administrative expenses and promotional costs, which reduced its margins. The foreign parent also provided financial support in the form of loss compensation and reimbursements for certain expenses, which the subsidiary initially treated as non-operating income. The tax authorities disputed this treatment of the compensations and reimbursements, arguing that as a limited risk distributor the company was not entitled to bear the costs of a market penetration strategy. The taxpayer countered that these measures were a legitimate response ... Continue to full case

To support its transfer pricing, SK MTS, s.r.o. submitted documentation that included a benchmark study, asserting that its pricing fell within the full range. Upon review, the tax authorities found that 9 out of the 10 companies included in the benchmark were not truly independent. Consequently, the authorities conducted their own benchmarking study and determined that the pricing of SK MTS, s.r.o.’s controlled transactions fell outside the interquartile range. They therefore adjusted the pricing to the median and issued an assessment. SK MTS, s.r.o. appealed the assessment to the Administrative Court. Judgment of the Court The Administrative Court dismissed the appeal and upheld the assessment issued by the tax authorities. Excerpts “22. Given that the companies compared by the plaintiffs did not meet the condition of independence and the plaintiff did not submit transfer documentation for 2019 to the tax administrator or prepare a comparability ... Continue to full case

IHLE ESPAÑA (later NEX TYRES) purchased tyres from its German parent company (IHLE BB) using what it claimed was the CUP method. It claimed that IHLE BB sold the tyres at the same price as it paid to third party suppliers, simply passing on additional transport costs and a small administration fee. The tax authorities rejected the CUP method used by IHLE and instead applied a TNMM, selecting a group of EU car parts wholesalers as comparables, using statistical tools to determine an interquartile range and then adjusting IHLE ESPAÑA’s profit to the median. IHLE ESPAÑA appealed. Judgment The Court ruled largely in favour of the tax authorities, but partially upheld IHLT’s appeal. The Court ruled that the “CUP method” used by IHLT was inconsistent because, once all indirect costs were added to the price, IHLE appeared to buy the tyres at a higher total ... Continue to full case

The tax authorities had audited Molinos and determined that transactions with a related party, Coopeliberia, had not been at arm’s length. According to the tax authorities, the prices set by Molinos resulted in losses for the company while benefiting Coopeliberia, which was exempt from income tax. This arrangement, artificially reduced Molinos’ taxable income, violating the principles outlined in the OECD’s transfer pricing guidelines. Judgment of the Supreme Court The Court upheld the tax adjustments made by the tax authorities, determining that the practice of shifting profits to a tax-exempt entity while incurring losses in a taxable entity constituted an abuse of tax regulations. Despite arguments presented by Molinos regarding economic conditions and compliance with international accounting standards, the Court reaffirmed the tax administration’s authority to intervene when pricing arrangements distort tax liabilities. Ultimately, the Court ruled against Molinos, upholding the adjustments imposed by the tax ... Continue to full case

SAS Roger Vivier Paris operates a store in Paris that sells shoes and luxury goods under the Roger Vivier brand. Since its inception in 2003, it had systematically generated negative net margins. Following an audit for the financial years 2012 to 2014, the tax authorities considered that SAS Roger Vivier Paris had indirectly transferred profits to foreign related parties due to non-arm’s length pricing of controlled transactions – low prices for returned unsold products and excessive costs related to the promotion and marketing of the Roger Vivier brand, which it did not own. In order to determine the arm’s length results of SAS Roger Vivier Paris, the tax authorities carried out a benchmark study and applied an operating margin of 6.76%, corresponding to the average operating margin of the study. This average operating margin was determined on the basis of the margins corresponding to the ... Continue to full case

“A Pharma Distributor SA” (A SA), is a Swiss pharmaceutical company that had been acquired by a Canadian group and subsequently turned into a limited risk distributor. Following the restructuring A. SA had reported a negative operating margin of -21.8% for 2018 to achieve an overall average operating margin of 1.2% over a three-year period (2016-2018). The tax authorities adjusted the 2018 operating margin to 1.1%, which resulted in additional taxable profit of CHF 8,922,473. A. SA appealed, arguing that its three-year average operating margin of 1.2% should be recognized instead of an annual assessment. Judgment The Administrative Court dismissed the appeal and upheld the tax authority’s adjustment. The court examined whether A. SA’s reported losses for 2018 were justified under Swiss tax law. The company argued that OECD Transfer Pricing Guidelines permit the use of multi-year data to determine appropriate margins and that adjustments ... Continue to full case

“Metal KtF”‘s main activity was the production of metal parts for the automotive industry. It had been making losses since 2012, while the group to which it belonged was profitable as a whole. The tax authorities conducted an audit and classified “Metal KtF” as a low-risk manufacturing company (contract manufacturer) because the functions and business risks assumed were not the same as those of an independent manufacturing company and the losses were partly the result of decisions taken by the parent company. The tax authorities concluded that “Metal KtF” provided a hidden service to the parent company by tolerating loss-making production. An assessmet was issued where the difference between the operating result (loss) reported by “Metal KtF” and the calculated arm’s length operating result had been added to the taxable income. “Metal KtF” filed an appeal, which was mostly dismissed by the Administrative Court, and ... Continue to full case

Futaba Czech s.r.o. is a Czech company that has been operating since 2005 as a manufacturer and supplier of components for the automotive industry and is part of the Japanese Futaba group. Futaba had been loss making in FY 2016-2017. Following a transfer pricing audit, the tax authorities found that Futaba had provided “comprehensive production service”, which should have compensated by the group. An assessment was issued based on the TNMM with NCP as Profit Level Indicator. Futaba Czech contested the assessment on several grounds. It argued that no instructions or pricing directives from the parent had been proven; that it in fact bore most business functions, risks and financing decisions; that the tax authorities had wrongly reallocated the functional‐and‐risk profile in a value‐chain analysis (for example assigning research and development 50 percent weight versus only 15 percent to production); that the choice of the ... Continue to full case

Illichmann Castalloy carries out activities related to the production of aluminium castings and is part of the Alicon Group based in Vienna. It had used the profit-split method for the pricing of controlled transactions and in the financial year 2012/2013 the company reported a loss of EUR 562,183.94. Based on a functional and risk analysis, the tax authorities found that the company did not perform any functions related to strategic decision-making or marketing activities. It had been assigned risks over which it had no control. According to the tax authorities, the company’s profile was that of a manufacturer with limited risk, and n this basis, the tax authorities considered that the profit split method was not the most appropriate method. The tax authorities instead used the TNMM to determine the taxable profit from the controlled transactions. Upon receipt of the resulting tax assessment, Illichmann Castalloy ... Continue to full case

CINTAC Chile S.A. had reported an operating loss for FY2018, but later received an assessment of additional taxable income from the tax authorities. In the assessment, a royalty rate of 2% determined by CINTAC Chile for the provision of know-how to a related party was instead set at 5% by the tax authorities. The royalty in question was received by CINTAC Chile S.A. from a related party under a know-how agreement. CINTAC Chile S.A. appealed, arguing that the tax authorities had not explained how they had determined the 5% royalty rate or why they had rejected the 2% rate determined by the parties to the transaction, and that the tax authorities had confused the provision of services with a know-how contract. Judgment of the Court of Appeal The court rejected CINTAC Chile S.A.’s claim regarding the arm’s length royalty rate under the know-how contract. “10°) ... Continue to full case

Global Tea & Commodities (Kenya) Ltd, a subsidiary of Global Tea & Commodities Ltd UK, traded tea on its own account and acted as an agent buying and exporting tea for related entities. The Kenya tax authorities assessed Global Tea & Commodities with a tax liability of Kshs 1,410,128,134 for the years 2015-2018, based on transfer pricing adjustments related to transactions with Tapal Tea PVT Ltd, a Pakistani company. Following an audit, the Tax authorities held the close relationship between Global Tea & Commodities and Tapal Tea PVT was evident through common directorship and significant trade volume without documented contractual agreements. They applied the TNMM based on a proper functional analysis. They also found, that an auction license constituted a valuable intangible asset. An appeal was filed in which Global Tea & Commodities argued it was incorrectly classified as related to Tapal Tea PVT, disputed ... Continue to full case

The case concerns the validity of the tax office’s decision of 18 October 2022 regarding DHL Global Forwarding (Norway) AS (DGF Norway). The decision increases the company’s taxable income for the years 2014 to 2019 by a total of NOK 242,870,750. The core of the dispute is whether DGF Norway’s income has been reduced due to a community of interest with companies in the same group, so that there is a basis for a discretionary assessment pursuant to section 13-1 of the Tax Act. DGF Norway made losses for 22 years from 1998 to 2019. The tax authorities claims that the business has been maintained for strategic reasons related to the group’s need for representation in Norway, and that the company has not been sufficiently compensated for the continuation of the loss-making activities seen in isolation. In the tax authorities’ view, a ‘service charge’ would ... Continue to full case

PT VVF Indonesia manufactures oleochemical products from crude palm kernel oil and split fatty acids. In 2016, the company purchased raw materials from independent suppliers and sold its products to both related and independent customers. Its main related customer that year was VVF India, which used the Indonesian company’s products as inputs for downstream oleochemicals. The dispute concerns the pricing of those sales to VVF India. PT VVF Indonesia’s local file applied a net cost plus method, reporting an adjusted margin of 4.62 per cent. It claimed that this figure sat within the interquartile range after adjusting for idle capacity driven by low production and export levies on palm oil derivatives. PT VVF Indonesia argued that their losses were commercial, that their comparables and adjustments met regulatory and OECD standards, and that the audit had ignored their file and introduced seven new comparables without providing ... Continue to full case

Since 2012, the French company SASU Alchimedics has been owned by Sinomed Holding Ltd, the holding company of a group established by a Chinese resident domiciled in the British Virgin Islands. SASU Alchimedics was engaged in the manufacture and marketing of products based on electro-grafting technology for biomedical applications, as well as the licensing and transfer of patents related to that technology. The company was audited for the financial years 2014 and 2015. As a result, the tax authorities increased its taxable income for the years ending 31 December 2013, 2014, and 2015 by the value of services that had not been invoiced to Sinomed Holding Ltd. The omission to invoice these services was treated as a transfer of profits abroad under Article 57 of the French General Tax Code, and the corresponding amounts were made subject to withholding tax. According to the tax authorities, ... Continue to full case

SA Compagnie Gervais Danone was the subject of an tax audit at the end of which the tax authorities questioned, among other things, the deduction of a compensation payment of 88 million Turkish lira (39,148,346 euros) granted to the Turkish company Danone Tikvesli, in which the french company holds a minority stake. The tax authorities considered that the payment constituted an indirect transfer of profits abroad within the meaning of Article 57 of the General Tax Code and should be considered as distributed income within the meaning of Article 109(1) of the Code, subject to the withholding tax provided for in Article 119a of the Code, at the conventional rate of 15%. SA Compagnie Gervais Danone brought the tax assessment to the Administrative Court and in a decision issued 9 July 2019 the Court discharged SA Compagnie Gervais Danone from the taxes in dispute. This ... Continue to full case

RKS, whose business consists of the manufacture of very large custom bearings for the civil and military industries, is controlled by the Swedish SKF group through (SAS) SKF Holding France. RKS was subject to a tax audit for FY 2009 and 2010, at the end of which the tax authorities took the view that the results reported by SAS RKS (losses since 2005) had not been determined in accordance with the arm’s length principle. It therefore increased SAS RKS’s results from 2006 to 2010 to the median net margin observed in a benchmark of eight comparable companies, equal to 4.17% in 2006, 4.32% in 2007, 3.38% in 2008, 2.33% in 2009 and 2.62% in 2010. SAS SKF France Holding applied to the Administrative Court for a discharge, and in judgment no. 1608939 of April 23, 2018, the Montreuil Administrative Court upheld the claim. In ruling ... Continue to full case