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 ECCO A/S.
The Court found that the transfer pricing documentation was not deficient to such an extent that it could be equated with missing documentation, and that the tax authorities did not prove that the pricing of the controlled transactions had not been at arm’s length. Hence, there was no justification for the assessment of additional income.
Denmark vs Shoe Group AS