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.

Czech Republic vs Aisan Industry Czech, s.r.o., April 2022, Supreme Administrative Court, Case No 7 Afs 398/2019 - 49

Czech Republic vs Aisan Industry Czech, s.r.o., April 2022, Supreme Administrative Court, Case No 7 Afs 398/2019 – 49

Aisan Industry Czech, s.r.o. is a subsidiary within the Japanese Aisan Industry Group which manufactures various engine components – fuel-pump modules, throttle bodies, carburetors for independent car manufactures such as Renault and Toyota. According to the original transfer pricing documentation the Czech company was classified as a limited risk contract manufacturer within the group, but yet it had suffered operating losses for several years. Following a tax audit an assessment was issued resulting in additional corporate income tax for FY 2011 in the amount of CZK 11 897 090, and on top of that a penalty in the amount of CZK 2 379 418. The assessment resulted from application of arm’s length provisions where the profitability of Aisan Industry Czech, s.r.o. had been determined on the basis of the profitability of comparable companies – TNMM method. An appeal was filed by Aisan Industry Czech, s.r.o ... Continue to full case
India vs Olympus Medical Systems India Pvt. Ltd., April 2022, Income Tax Appellate Tribunal - New Delhi, Case No 838/DEL/2021

India vs Olympus Medical Systems India Pvt. Ltd., April 2022, Income Tax Appellate Tribunal – New Delhi, Case No 838/DEL/2021

Olympus Medical Systems India is a subsidiary of Olympus Corp and engaged in the import, sale and maintenance of medical equipment in India. For FY 2012 and 2013 the company reported losses. An transfer pricing audit was initiated by the tax authorities and later an assessment was issued. Since Olympus India had failed to provide audited financials of its associated enterprises to determine the overall profits of the group, it adopted the Resale Price Method using the Bright Line Test approach. An appeal was then filed by Olympus with the Tax Appellate Tribunal. Olympus India argued that the tax authorities was erroneous in adopting the Residual Profit Split Method in determining the arm’s length price of the AMP expenses and furthermore that the tax authorities could not make an adjustment without having information on the total profits of the group. Judgement of the Tax Appellate ... Continue to full case
Poland vs A. Sp. z o. o., February 2022, Supreme Administrative Court, Case No II FSK 1475/19

Poland vs A. Sp. z o. o., February 2022, Supreme Administrative Court, Case No II FSK 1475/19

A. Sp. z o.o. was established to carry out an investment project consisting in construction of a shopping center. In order to raise funds, the company concluded a loan agreement. The loan agreement was guaranteed by shareholders and other related parties. By virtue of the guarantees, the guarantors became solitarily liable for the Applicant’s obligations. The guarantees were granted free of charge. A. Sp. z o.o. was not obliged to pay any remuneration or provide any other mutual benefit to the guarantors. In connection with the above description, the following questions were asked: (1) Will A. Sp. z o.o. be obliged to prepare transfer pricing documentation in connection with the gratuitous service received, and if so, both for the year in which the surety is granted to the Applicant or also for subsequent tax years during the term of the security? (2) Will A. Sp ... Continue to full case
Colombia vs Petroleum Exploration International Sucursal Colombia S.A., November 2021, The Administrative Court, Case No. 25000-23-37-000-2016-01988-01(24028)

Colombia vs Petroleum Exploration International Sucursal Colombia S.A., November 2021, The Administrative Court, Case No. 25000-23-37-000-2016-01988-01(24028)

Article 260-8 of the Colombian Tax Statute established which taxpayers were obliged to file Transfer pricing documentation. The rule established two requirements for income taxpayers to be obliged to file DIIPT in the year 2010, the first is to have obtained a gross equity on 31 December of the taxable period of 100.100,000 UVT ($2,455,500,000) or gross income of 61,000 UVT ($1,497,855,000), and the second is to have carried out operations with economic associates or related parties domiciled abroad. In the present case, a Colombian branch of Petroleum Exploration International S.A presented a total gross income of $18,496,716,000 in the income tax return for 2010, and therefore complied with the first requirement. As for the second requirement, it is noted that according to the certificate of existence and legal representation of Colombian branch, it is a branch of the company Petroleum Exploration International S.A. whose ... Continue to full case
Denmark vs. "Advisory business ApS", June 2021, High Court, Case No SKM2021.335.OLR

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
Hungary vs "GW Logistics", March 2021, Appeals Court Curia, Case No. Kfv.I.35.320/2020/6

Hungary vs “GW Logistics”, March 2021, Appeals Court Curia, Case No. Kfv.I.35.320/2020/6

GW Logistics was engaged in the activity of transport management (shipping and Logistics) and a member og the German Gebrüder Weiss Group. The tax authorities carried out an audit of the tax returns for the years 2010-2011 and increased GW Logistics’s taxable profit by HUF 189 159 000 for 2010 and by HUF 53 373 000 for 2011, because of the difference between the consideration paid by the applicant for related party transactions and the open market price. Since GW Logistics had not prepared transfer pricing documentation for its maritime transport activities in 2010 and 2011, the tax authority imposed a default fine of HUF 1 500 000. The tax authority applied the TNMM method to determine the arm’s length profitability. In the course of the audit, the tax authority informed GW Logistics that the data provided were not suitable for obtaining transaction-level profitability information ... 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
Romania vs "GAS distributor" SC A, December 2020, Court of Appeal, Case No 238/12.03.2020

Romania vs “GAS distributor” SC A, December 2020, Court of Appeal, Case No 238/12.03.2020

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
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
Czech Republic vs Aisan Industry Czech, s.r.o., October 2019, Regional Court, Case No 15 Af 105/2015

Czech Republic vs Aisan Industry Czech, s.r.o., October 2019, Regional Court, Case No 15 Af 105/2015

Aisan Industry Czech, s.r.o. is a subsidiary within the Japanese Aisan Industry Group which manufactures various engine components – fuel-pump modules, throttle bodies, carburetors for independent car manufactures such as Renault and Toyota. According to the original transfer pricing documentation the Czech company was classified as a limited risk contract manufacturer within the group, but yet it had suffered operating losses for several years. Following a tax audit an assessment was issued resulting in additional corporate income tax for FY 2011 in the amount of CZK 11 897 090, and on top of that a penalty in the amount of CZK 2 379 418. The assessment resulted from application of arm’s length provisions where the profitability of Aisan Industry Czech, s.r.o. had been determined on the basis of the profitability of comparable companies – TNMM method. An appeal was filed by Aisan Industry Czech, s.r.o ... Continue to full case
Panama vs Chevron Panama Fuels Limited, October 2019, Administrative Court of Appeals, Case no 1060 (559-19)

Panama vs Chevron Panama Fuels Limited, October 2019, Administrative Court of Appeals, Case no 1060 (559-19)

The Transfer Pricing Department of the General Directorate of Revenue of the Ministry of Economy and Finance, through Resolution 201-1429 of 24 October 2014, decided to sanction the taxpayer Chevron Products Antilles, LTD, now Chevron Panama Fuels Limited, with a fine of one million balboas (B/. 1,000,000.00), for failure to file the Transfer Pricing Report-Form 930 for the 2012 tax period. As a result of the issuance of the resolution mentioned in the previous paragraph, Chevron’s legal representative filed an appeal for reconsideration with the tax authority, which was resolved by Resolution 201-1321 of 1 March 2016, through which the accused act was maintained in all its parts. This resolution was notified to the taxpayer on 8 April 2016. Chevron then filed an appeal before the Administrative Tax Court, which by Resolution TAT-RF-057 of 22 May 2019, confirmed the provisions of the main administrative act ... Continue to full case
Mexico vs "TP doc-Lawsuit", June 2019, Supreme Court, Case No. 14039/17-17-10-3/2502/18-PL-07-04

Mexico vs “TP doc-Lawsuit”, June 2019, Supreme Court, Case No. 14039/17-17-10-3/2502/18-PL-07-04

In this case a group of taxpayers filed a lawsuit for the nullity of the new Mexican transfer pricing documentation obligations introduced in 2017 by rules 3.9.11, 3.9.14, 3.9.15, 3.9.16 and 3.9.17 of the First Resolution of Amendments to the Tax Miscellaneous published in the Official Gazette of the Federation, issued by the Head of the Tax Administration Service. Article 76-A of the Mexican Income Tax Law states that the taxpayers referred to in Article 32-H, Sections I, II, III and IV of the Federal Tax Code who enter into transactions with related parties must provide the tax authorities with annual related party information returns: 1) master file; 2) local file and 3) a country-by-country report. This three tiered documentation package provides the tax authorities with information related to transactions between related parties on transfer pricing, in order to identify conduct that could imply a ... 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
Poland vs A. Sp. z o.o., March 2019, Administrative Court, Case No I SA/Rz 1178/18

Poland vs A. Sp. z o.o., March 2019, Administrative Court, Case No I SA/Rz 1178/18

A. Sp. z o.o. was established to carry out an investment project consisting in construction of a shopping center. In order to raise funds, the company concluded a loan agreement. The loan agreement was guaranteed by shareholders and other related parties. By virtue of the guarantees, the guarantors became solitarily liable for the Applicant’s obligations. The guarantees were granted free of charge. A. Sp. z o.o. was not obliged to pay any remuneration or provide any other mutual benefit to the guarantors. In connection with the above description, the following questions were asked: (1) Will A. Sp. z o.o. be obliged to prepare transfer pricing documentation in connection with the gratuitous service received, and if so, both for the year in which the surety is granted to the Applicant or also for subsequent tax years during the term of the security? (2) Will A. Sp ... 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