Category: Transfer Pricing Documentation

In most countries transfer pricing documentation for MNE’s is required by law.

Transfer pricing documentation usually consists of a master file, a local file and a country by country report. These files and reports will provide tax authorities with a detailed description of the MNE and an in depth analysis of prices and terms applied to controlled transactions.

Denmark vs. “Advisory business ApS”, June 2021, High Court, Case No SKM2021.335.OLR

The case concerned a Danish company that provided legal services regarding tax deductions for improvements to real estate, etc. In 2006, the owner of the Danish company moved to Y2 city and in the process established a company in Y2 city, which would then provide services to the Danish sister company, including legal advice. The tax authorities had increased the Danish company’s taxable income by an estimated total of approximately DKK 58.4 million, as the tax authorities considered that the company’s transfer pricing documentation was sufficiently deficient, in accordance with Section 3 B(8) of the Tax Control Act, cf. Section 5(3), and that the service agreements were not concluded at arm’s length in breach Danish arm’s length provisions. Judgement of the High Court The tax authorities were entitled to exercise discretion over pricing of the controlled transactions as the transactions had not been priced at ... Continue to full case
Denmark vs Tetra Pak Processing Systems A/S, April 2021, Supreme Court, Case No BS-19502/2020-HJR

Denmark vs Tetra Pak Processing Systems A/S, April 2021, Supreme Court, Case No BS-19502/2020-HJR

The Danish tax authorities had issued a discretionary assessment of the taxable income of Tetra Pak Processing Systems A/S due to inadequate transfer pricing documentation and continuous losses. Judgement of the Supreme Court The Supreme Court found that the TP documentation provided by the company did not comply to the required standards. The TP documentation did state how prices between Tetra Pak and the sales companies had been determined and did not contain a comparability analysis, as required under the current § 3 B, para. 5 of the Tax Control Act and section 6 of the Danish administrative ordinance regarding transfer pricing documentation. Against this background, the Supreme Court found that the TP documentation was deficient to such an extent that it had to be equated with missing documentation. The Supreme Court agreed that Tetra Pak’s taxable income for FY 2005-2009 could be determined on ... Continue to full case
Poland vs Q. F. sp. z o.o., January 2021, Supreme Administrative Court, Case No II FSK 2514

Poland vs Q. F. sp. z o.o., January 2021, Supreme Administrative Court, Case No II FSK 2514

A request for an interpretation was submitted by a company in regards to financial transactions (loans and guarantees) with related parties. The requested interpretation was relevant in determining the amount of the controlled transactions and on that basis whether the taxpayer was required to prepare TP documentation or not. The company held that in determining the value of a loan transaction, only the value of interest should be taken into account. The tax authorities held that both the amount of interest and the amount of capital were to be included in amount of the transaction. Judgement of the Supreme Administrative Court The Court decided in favour of the tax authorities. Applying a linguistic interpretation, the court found no support for excluding the capital part of a loan transaction from the amount of the transaction. Click here for English Translation Click here for other translation II ... Continue to full case
Luxembourg vs "Lux Service SA", December 2020, Higher Administrative Court, Case No 45072

Luxembourg vs “Lux Service SA”, December 2020, Higher Administrative Court, Case No 45072

In August 2020, the competent authority of the Belgian tax administration sent a request for information to the Luxembourg tax administration concerning “Lux Service SA” under the tax convention between Luxembourg and Belgium. The requested information regarding “Lux Service SA” was documentation related to the basis for service payments from a related party in Belgium. The tax administration in Luxembourg contacted “Lux Service SA” and requested submission of the information and documents. Lux Service SA did not want to accommodate the request and brought the case to the High Administrative court for an annulment. The tax authorities argued that the appeal should be dismissed as unfounded. The Court dismissed the appeal of “Lux Services SA” and upheld the information injunction issued by the tax administration. The argument that the tax administration had failed to state the reasons for the information injunction was rejected by the ... Continue to full case
Denmark vs. ECCO A/S , October 2020, High Court, Case No SKM2020.397.VLR

Denmark vs. ECCO A/S , October 2020, High Court, Case No SKM2020.397.VLR

ECCO A/S is the parent company of a multinational group, whose main activity is the design, development, production and sale of shoes. The group was founded in 1963, and has since gone from being a small Danish shoe manufacturer to being a global player with about 20,000 employees and with sales and production subsidiaries in a large number of countries. ECCO purchased goods from both internal and external producers, and at issue was whether transactions with it’s foreign subsidiaries had been conducted at arm’s length terms. ECCO had prepared two sets of two transfer pricing documentation, both of which were available when the tax authorities issued its assessment. The transfer pricing documentation contained a review of the parent company’s pricing and terms in relation to both internal and external production companies, and a comparability analyzes. The High Court issued a decision in favor of the ... Continue to full case
Canada vs Bayer Inc. July 2020, Federal Court, T-272-19

Canada vs Bayer Inc. July 2020, Federal Court, T-272-19

Bayer Inc, is a Canadian subsidiary of Bayer AG Germany. Bayer is a multinational group of companies in the pharmaceutical and life sciences industry . Since 2016, the Canada Revenue Agency has been auditing Bayer Inc. 2013-2015 taxation years. Between December 2017 and August 2018, the CRA made a series of requests to Bayer Canada for copies of agreements that had been negotiated at arm’s length with respect to the activities that are being examined in the audit. On August 21, 2018, the CRA issued Query No 17 to Bayer Canada, in which it revised its previous requests as follows: Pursuant to our discussion on July 18, 2018, we would like to audit agreements made between any member of the Bayer Group with third party(s) in force during the 2013 and 2014 taxation years that perform some or all of the following activities in regards ... Continue to full case
Panama vs "Glass Corp", February 2020, Administrative Tribunal, Case No TAT-RF-015

Panama vs “Glass Corp”, February 2020, Administrative Tribunal, Case No TAT-RF-015

“Glass Corp” Panama, was issued a fine for not filing (in time) Transfer Pricing Report – Form 930 – for the fiscal year 2012. Article 762-I of the Tax Code in Panama establishes that failure to comply with filing obligation of transfer pricing documentation results in a fine of 1% of the total amount of the transactions with related parties. The decision of the Court “since it has been demonstrated that the formal duty to submit the Transfer Pricing Report contained in Article 762-I of the Tax Code has not been fulfilled by the company, this Administrative Tribunal considers that it is appropriate to confirm Resolution No. 201-579 of 15 October 2014 and the administrative act by which the General Revenue Directorate resolves to maintain it in all its parts.” Click here for English translation Panama Exp. 176-18 ... Continue to full case
Panama vs "Oil Export S.A", May 2019, Administrative Tribunal, TAT-RF-057

Panama vs “Oil Export S.A”, May 2019, Administrative Tribunal, TAT-RF-057

“Oil Export S.A” Panama, was issued a fine of $ 1 mill. for not filing Transfer Pricing Report – Form 930 – for the fiscal year 2012. Article 762-I of the Tax Code in Panama establishes that “Failure to submit the report shall be sanctioned with a fine equivalent to 1% of the total amount of the operations with related parties. For the calculation of the fine, the gross amount of the operations shall be considered, regardless of whether they are representative of income, costs, or deductions.” The fine referred to in the paragraph shall not exceed one million balboas (B/.1,000,000.00). The decision of the Court “Consequently, since it has been demonstrated that —[“Oil Export S.A”]— did not comply with the formal obligation to submit the Transfer Pricing Report contained in Article 762-I of the Tax Code, the Tax Administration considers that it is appropriate ... Continue to full case
Norway vs Stanley Black & Decker Norway AS , December 2018, Borgarting Lagmannsrett, Case No 2016-105694

Norway vs Stanley Black & Decker Norway AS , December 2018, Borgarting Lagmannsrett, Case No 2016-105694

At issue was the transfer pricing method applied on transactions between Black & Deckers Norwegian distribution company and the group trading hub in Luxembourg, Black & Decker Ltd SARL. The Norwegian tax authorities in 2013 issued a tax assessment of Black and Decker Norway AS where the taxable income for years 2005 – 2008 was increased with a total amount of NOK 50 million. The assessment was appealed to the Tax Appeals Committee where the amount was reduced to a total of NOK 26 million in line with recommendations of the tax authorities during the proceedings. The decision of the Tax Appeals Committee was upheld by the District Court and later the Court of Appeal where the appeal of Black & Decker was rejected. Click here for translation Norway vs Black & Decker december 2018 case no LB-2016-105694 ... Continue to full case
France vs GE Medical Systems, November 2018, Supreme Court - Conseil d’État n° 410779

France vs GE Medical Systems, November 2018, Supreme Court – Conseil d’État n° 410779

Following an audit of GE Medical Systems Limited Partnership (SCS), which is engaged in the manufacturing and marketing of medical equipment and software, the French tax authorities issued an assessment related to the “value added amount” produced by the company, which serves as the basis for calculating the French minimum contribution of business tax provided for in Article 1647 E of the General Tax Code. The tax authorities was of the view that (1) prices charged for goods and services provided to foreign-affiliated companies had been lower than arm’s length prices and that (2) part of deducted factoring costs were not deductible in the basis for calculating the minimum business tax. On that basis a discretionary assessment of additional minimum business tax was issued. GE Medical Systems appealed the assessment to the Administrative Court of  Appeal. The Court of Appeal came to the conclusion that ... Continue to full case
Denmark vs Microsoft Denmark, March 2018, Danish National Court, SKM2018.416.ØLR

Denmark vs Microsoft Denmark, March 2018, Danish National Court, SKM2018.416.ØLR

The Danish Tax Ministry and Microsoft meet in Court in a case where the Danish tax authorities had issued an assessment of DKK 308 million. The Danish tax authorities were of the opinion that Microsoft had not been properly remunerated for performing marketing activities due to the fact that OEM sales to Danish customers via MNE OEM’s had not been included in the calculation of local commissions. In court, Microsoft required a dismissal with reference to the fact that Sweden, Norway and Finland had either lost or resigned similar tax cases against Micorosoft. The National Court ruled in favor of Microsoft. The decision was later confirmed by the Supreme Court. Click here for translation DK vs MS Marketing-and Sales Commissioner ... Continue to full case
Denmark vs. Danish Production A/S, Feb 2018, Tax Tribunal, SKM2018.62.LSR

Denmark vs. Danish Production A/S, Feb 2018, Tax Tribunal, SKM2018.62.LSR

The Danish Tax Tribunal found that the tax administration had been entitled to make a discretionary assessment, due to the lack of a comparability analysis in the company’s transfer pricing documentation. The Tax Tribunal also found that the Danish company had correctly been chosen as tested party when applying the TNMM, although the foreign sales companies were the least complex. Information about the foreign sales companies was insufficient and a significant part of the income in the foreign sales companies related to sale of goods not purchased from the Danish production company. Click here for translation SKM2018-62-LSR ... Continue to full case
Denmark vs. Corp, March 2017, Tax Tribunal, SKM2017.187

Denmark vs. Corp, March 2017, Tax Tribunal, SKM2017.187

The Danish Tax administration had made an estimated assessment due to a insufficient TP documentation. In the assessment goodwill amortizations were included when comparing the operating income of the company to that of independent parties in a database survey. The Tax Tribunal found that the tax administration was not entitled to make an estimated assessment under Article 3B (3) of the current Tax Control Act. 8 (now paragraph 9) and section 5 3, where the TP documentation provided a sufficient basis for assessing whether prices and terms were in accordance with the arm’s length principle. According to the Tax Tribunal goodwill amortizations should not be included when comparing the operating income of the company to the operating income of independent parties in a database survey. Hence the assessment was reduced to DKK 0. The case has been appealed to the Danish National Court by the tax authorities ... Continue to full case
Russia vs Dulisma Oil, January 2017, Russian Court Case No. A40-123426 / 16-140-1066

Russia vs Dulisma Oil, January 2017, Russian Court Case No. A40-123426 / 16-140-1066

This case relates to sales of crude oil from the Russian company, Dulisma Oil,  to an unrelated trading company, Concept Oil Ltd, registered in Hong Kong. The Russian tax authorities found that the price at which oil was sold deviated from quotations published by the Platts price reporting agency. They found that the prices for particular deliveries had been lower than the arm’s length price and issued a tax assessment and penalties of RUB 177 million. Dulisma Oil had set the prices using quotations published by Platts, which is a common practice in crude oil trading. The contract price was determined as the mean of average quotations for Dubai crude on publication days agreed upon by the parties, minus a differential determined before the delivery date “on the basis of the situation prevailing on the market”. Transfer pricing documentation had not been prepared, and the company also failed ... Continue to full case
Denmark vs. Corp, December 2016, Tax Tribunal, SKM2017.115

Denmark vs. Corp, December 2016, Tax Tribunal, SKM2017.115

The case relates to controlled transactions between a Danish company and its permanent establishment, as well as the calculation of taxable income of the permanent establishment. The Danish Tax Administration was entitled to make tax assessment in accordance with applicable Tax Law. The transfer pricing-documentation provided by the Company lacked a comparability analysis. The assessment was in line with the OECD Transfer Pricing Guidelines, but some corrections to the tax assessment were made. Click here for translation Denmark-2016-Tax-Tribunal-SKM2017-115-LSR ... Continue to full case
Norway vs. Total E&P Norge AS, October 2015, Supreme Court 2014/498, ref no. HR-2015-00699-A

Norway vs. Total E&P Norge AS, October 2015, Supreme Court 2014/498, ref no. HR-2015-00699-A

Total E&P Norge AS (Total) is engaged in petroleum exploration and production activities on the Norwegian Continental Shelf. Income from such activities is subject to a special petroleum tax, in addition to the normal corporate tax, resulting in a total nominal tax rate of 78%. In 2002-2007, Total sold gas to the controlled trading companies, and the trading companies resold the gas to third parties on the open market. The Supreme Court concluded that Total did not have a right to full access to the comparables. Although section 3-13 (4) of the Tax Assessment Act states that information subject to confidentiality may be given to third parties with the effect that such third parties are subject to the same duty of confidentiality, this rule could not, according to the Supreme Court, be applied in the present case. This was because the very point of the ... Continue to full case
Italy vs GE TRANSPORTATION SYSTEMS SPA, December 2014, Supreme Court 27296

Italy vs GE TRANSPORTATION SYSTEMS SPA, December 2014, Supreme Court 27296

In this case the Italien tax administration concluded that transactions between an Italien company an a German sister company had been priced lower than the “normal value” of similar transactions. Judgement of the Supreme Court The Supreme Court ruled partly in favor of the GE Transportation Systems S.p.A. and partly in favour of the tax authorities. The case was remanded to the lower court for further considerations. In relation to intercompany transactions the court found that GE Transportation Systems S.p.A. had only limited risk and that the German company owned the intellectual property. In relation to transactions with independent companies, GE Transportation Systems S.p.A. assumed the risks of the transaction and had the rights to manufacture and sell the products. These differences justified different price and led to the transactions not being comparable. The Court concluded that the limited risk – contract manufacturing – transactions ... Continue to full case
Denmark vs. Bombardier, October 2013, Administrative Tax Court, SKM2014.53.LSR

Denmark vs. Bombardier, October 2013, Administrative Tax Court, SKM2014.53.LSR

The issue in the case was whether the applicable rates under the cash pool arrangement were on arm’s length, i.e. in accordance with the transfer pricing requirements. The Administrative Tax Court upheld most of the conclusions of the tax authorities. First, the Court found that the tax authorities were allowed to assess an arm’s length rate due to the lack of transfer pricing documentation. Second, the financial service fee of 0.25% was upheld. Third, the Court concluded that the rate on the short-term deposits and the corresponding loans (borrowed due to insufficient liquidity management) should be the same. The Administrative Tax Court observed that there was very little or no creditor risk on these gross corresponding loans/deposits because of the possibility of offsetting the balance. Hence, according to the Court, there was no basis for a spread on the gross balance. However, the rate spread ... Continue to full case
Germany vs "Asset management Gmbh", April 2013, Supreme Administrative Court, Case No I R 45/11

Germany vs “Asset management Gmbh”, April 2013, Supreme Administrative Court, Case No I R 45/11

Asset management Gmbh was a subsidiary of a Luxembourg investment fund management company. The German company paid substantial fees to a Luxembourg service company. Both companies in Luxembourg were wholly-owned by a Luxembourg holding company. Asset management Gmbh was obliged to follow the policies of the fund. These could only be revised by a two-thirds majority resolution of the investors. The German company argued that this restriction meant that its Luxembourg shareholder could not be forced to follow a common business policy with the service provider. Accordingly the two were not related parties within the meaning of the Foreign Tax Act and there was no requirement for it to furnish the extensive transfer pricing documentation in support of its transactions with associated enterprises as required by the Tax Management Act. In any case, the fact that these transfer pricing documentation requirements only applied to cross-border ... Continue to full case
Japan vs Manufacturing Co. March 2013, Tokyo High Court, No 19

Japan vs Manufacturing Co. March 2013, Tokyo High Court, No 19

A Japanese manufacturing company was issued an estimated tax assessment due to lack of transfer pricing documentation. The District Court ruled in favor of the tax authorities. The Court decided that accounts and documents necessary for calculating arms’s length prices should be presented or submitted to the tax authorities without delay. If sufficient documentation is not submitted, the requirement for an estimated taxation is satisfied. Furthermore, in such cases the burden of proof shifts to the taxpayer side. See the transcripts from the district Court below. The case was then appealed by the company to Tokyo High Court, which also ruled in favor of the tax authorities. Click here for English Translation Click here for other translation Japan-vs-Manufacturing-Co.083647_hanrei See transcripts from the district Court below. Click here for translation – Part 1 Click here for translation – Part 2 Click here for translation – Part ... Continue to full case