The case concerned the assessment of EET Group’s taxable income for the income years 2010-2012 in relation to the company’s income from the sale of goods to seven of the group’s sales companies. EET Group A/S purchases IT components and spare parts from independent suppliers and resells them to the group’s distribution companies, which are established in a number of European countries.
The tax authorities increased EET Group’s taxable income for the income years 2010-2012. According to the tax authorities, the distribution companies in the group had earned significantly more than comparable low risk distributors.
The Tax Tribunal subsequently annulled the adjustment for FY 2010, and reduced the adjustment for FY 2011 and 2012 by adjusting only to the outer quartile of the arm’s length range.
An appeal was then filed with the Court of Appeal, which in June 2024 delivered a ruling in favour of EET Group.
The tax authorities then filed an appeal with the Supreme Court.
Judgment
The Supreme Court reached a similar conclusion to that of the Court of Appeal, ruling in favour of EET Group A/S.
The Court found that there was no basis for concluding that the transfer pricing documentation was significantly deficient.
Furthermore, the Court found that the fact that the margins of a number of EET sales companies were outside the interquartile range (i.e. the middle 50%) of comparable companies’ margins was not sufficient proof that the EET Group and its distribution companies had not priced their transactions at arm’s length. The Court stated that, in the present case, calculations of interquartile ranges were only of limited use in determining whether there had been no arm’s length pricing, as information was available on only a limited number of comparable companies.
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