In this case, the Danish tax authorities were of the opinion that Microsoft Denmark 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.
According to the Market Development Agreement (MDA agreement) concluded between Microsoft Denmark and MIOL with effect from 1 July 2003, Microsoft Denmark received the largest amount of either a commission based on sales invoiced in Denmark or a markup on it’s costs.
Microsoft Denmark’s commission did not take into account the sale of Microsoft products that occurred through the sale of computers by multinational computer manufacturers with pre-installed Microsoft software to end users in Denmark – (OEM sales).
In court, Microsoft required a dismissal.
In a narrow 3:2 decision the Danish Supreme Court found in favor of Microsoft.
“…Microsoft Denmark’s marketing may have had some derivative effect, especially in the period around the launch in 2007 of the Windows Vista operating system, which made higher demands on the computers. On the other hand, it must be assumed that also the recommendations of Microsoft products made by the multinational computer manufacturers under agreements between, among others, Dell and Microsoft Denmark’s American parent company, which, in return, gave discounts to computer manufacturers, may have had an effect on, among other things. sales of Package licenses in Denmark, whereby Microsoft Denmark, in its remuneration, benefited from this marketing effort. The significance of the various companies’ marketing efforts and the interaction between them has not been elucidated during the case, and we find it unlikely that Microsoft Denmark’s marketing had an effect on the sale of MNA OEM licenses in the US and other countries outside Denmark, which exceeded the importance of computer manufacturers marketing for the sale of package licenses, which were included in the basis for the remuneration of Microsoft Denmark.
Based on the above, we do not find that Microsoft Denmark’s remuneration for the company’s marketing efforts was not in accordance with the arm’s length principle.”
DK vs MS Marketing-and Sales Commissioner