Ruling by the Finnish Supreme Administrative Court on enterprise resource planning and intra-group services arrangements.
A Oyj had provided its subsidiaries with supply chain services, marketing and brand management services as well as personnel and computer services. The services offered by A Plc mainly consisted in the coordination and harmonization of the Group’s operations. A’s turnover consisted almost exclusively of the service fees received from the sale of these administrative services. As a service charge, A Oyj had charged the amount of the costs incurred in producing the services without the amount of the bonus.
On the basis of the tax audit findings, the Tax Administration has added to the taxed income of A plc with ex post taxation and tax corrections to the detriment of the taxpayer the sums equivalent to seven percent payables. The amount of the bonus was established on the basis of a comparison of the Bureau van Dijk Amadeus database with the tax audit. As a comparison company there were nine independent consulting companies.
The Supreme Administrative Court took the view that A Oyj should have charged a group of companies in addition to the amount corresponding to the costs incurred in providing the services, in addition to the winnings, in order that the fees charged by it would have been market-based. However, the market-based gains on the service charges levied by A Oyj have not been determined on the basis of the level of profitability of the third-party comparison companies because the services offered by independent consulting companies and parent companies differ so that the differences significantly affect the amount of the wage premium on the free market and the differences can not be eliminated with fairly accurate corrections. On the other hand, the market-based wage supplement was to be determined taking into account the benefits that the management services offered by A plc had enabled the Group companies to produce. Taking into account the explanation of the nature of the services provided by A plc, the amount of the winnings added to the company’s taxable income was reduced to a three percent payoff. Tax years 2005 – 2007.Finland vs Corp September 2017 HFD 2017-145