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Greece vs X Ltd., May 2021, Administrative Tribunal, Case No 1674/2021

Posted on May 28, 2021 | By Courts of Greece | No comments

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This case deals with arm’s length pricing of limited risk manufacturing services.

Following an audit of the X Ltd, the prices paid to a foreign manufacturer in the group was determined by the Grees tax authorities to have been above the arm’s length price. On that basis an upwards adjustment of the taxable income of X Ltd. was issued.

Judgment of the Court

The court dismissed the appeal of the X Ltd. Since the audit findings as recorded in the partial income tax audit report of the Head of the C.E.M.E.P. dated 08/07/2020 are found to be valid, thorough and fully substantiated, the present appeal must be dismissed.

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Related Guidelines

TPG2022 Chapter III paragraph 3.57It may also be the case that, while every effort has been made to exclude points that have a lesser degree of comparability, what is arrived at is a range of figures for which it is considered, given the process used for selecting comparables and limitations in information available on...

TPG2022 Chapter III paragraph 3.63Extreme results might consist of losses or unusually high profits. Extreme results can affect the financial indicators that are looked at in the chosen method (e.g. the gross margin when applying a resale price, or a net profit indicator when applying a transactional net margin method). They can also affect...

TPG2022 Chapter III paragraph 3.62In determining this point, where the range comprises results of relatively equal and high reliability, it could be argued that any point in the range satisfies the arm’s length principle. Where comparability defects remain as discussed at paragraph 3.57, it may be appropriate to use measures of central tendency to...

TPG2022 Chapter III paragraph 3.61If the relevant condition of the controlled transaction (e.g. price or margin) falls outside the arm’s length range asserted by the tax administration, the taxpayer should have the opportunity to present arguments that the conditions of the controlled transaction satisfy the arm’s length principle, and that the result falls within...

TPG2022 Chapter III paragraph 3.60If the relevant condition of the controlled transaction (e.g. price or margin) is within the arm’s length range, no adjustment should be made....

TPG2022 Chapter III paragraph 3.42The second possibility, the “deductive” approach, starts with a wide set of companies that operate in the same sector of activity, perform similar broad functions and do not present economic characteristics that are obviously different. The list is then refined using selection criteria and publicly available information (e.g. from databases,...

TPG2022 Chapter III paragraph 3.19This can be illustrated as follows. Assume that company A manufactures two types of products, P1 and P2, that it sells to company B, an associated enterprise in another country. Assume that A is found to manufacture P1 products using valuable, unique intangibles that belong to B and following technical...

TPG2022 Chapter III paragraph 3.18When applying a cost plus, resale price or transactional net margin method as described in Chapter II, it is necessary to choose the party to the transaction for which a financial indicator (mark-up on costs, gross margin, or net profit indicator) is tested. The choice of the tested party should...

TPG2022 Chapter III paragraph 3.8The review of the controlled transaction(s) under examination aims at identifying the relevant factors that will influence the selection of the tested party (where needed), the selection and application of the most appropriate transfer pricing method to the circumstances of the case, the financial indicator that will be tested (in...

TPG2022 Chapter II paragraph 2.110See in particular paragraphs 3.18-3.19 for guidance on the tested party, paragraphs 3.55-3.66 for guidance on the arm’s length range, and paragraphs 3.75-3.79 for guidance on multiple year data....

Supplemental Guidance

Greece vs “Diary Distributor Ltd.”, November 2021, Administrative Tribunal, Case No 579/2021A Greek dairy distributor was audited by the tax authorities, who determined that prices paid to related parties in FY 2017 exceeded the arm's length range and issued an upward taxable income adjustment. The company appealed, but the Administrative Tribunal dismissed the appeal in November 2021, fully upholding the tax...

Greece vs “Marine Fuel Ltd”, January 2022, Administrative Tribunal, Case No 36/2022A Greek marine fuel company was audited for FY 2015, with tax authorities rejecting its chosen CUP method and applying TNMM instead, resulting in an upward transfer pricing adjustment. The company challenged the assessment before the Dispute Settlement Board, which dismissed the complaint and upheld the tax authority's position, confirming...

Denmark vs “Soy A/S”, June 2023, Court of Appeal, SKM2023.316.ØLRA Danish company's transfer pricing documentation was found materially deficient by the Court of Appeal in 2023, as it failed to describe how prices were determined or provide adequate information about the related flow-through entity's business activities. SKAT was entitled to issue a discretionary assessment. The court also upheld withholding...

Greece vs “G Pharma Ltd”, july 2020, Administrative Tribunal, Case No 1582/2020A Greek pharmaceutical distributor buying exclusively from affiliates reported losses for 17 consecutive years. The tax authority applied the TNMM, arguing a limited risk distributor should earn a small guaranteed positive return. The Administrative Tribunal dismissed the company's appeal in 2020, upholding the assessment and confirming the arm's length range...

Italy vs Burckert Contromatic Italiana S.p.A., November 2021, Corte di Cassazione, Sez. 5 Num. 1417 Anno 2022An Italian subsidiary of the German Bürkert Group challenged a 2007 transfer pricing assessment concerning intra-group costs paid to its Swiss parent. The tax authority applied TNMM using three comparables and found a return on sales of 13.35%, disallowing excess costs. After lower courts favoured the taxpayer, Italy's Supreme Court...

Colombia vs SONY Music Entertainment Colombia S.A., July 2021, The Administrative Court, Case No. 20641Sony Music Entertainment Colombia had paid administrative service fees to a related US entity. Colombian tax authorities disallowed deductions after rejecting revised transfer pricing documentation that changed the tested party to the US company. The Administrative Court ruled in favour of Sony in 2021, accepting the corrected documentation and finding...

Panama vs “Construction S.A.”, December 2021, Administrative Tribunal, Case No TAT- RF-111 (112/2019)A Panamanian construction company paid management and construction service fees to related parties during 2011–2013. The tax authority challenged the benchmark studies in the transfer pricing documentation, citing comparability defects and insufficient proof of service delivery. The Panama Administrative Tribunal ruled in favour of the taxpayer in December 2021, revoking...

Greece vs “Pharma Distributor Ltd.”, November 2022, Administrative Tribunal, Case No ΔΕΔ 3712/2022A Greek pharmaceutical distributor applied the resale price method for its intra-group sales and service activities, but the tax authorities rejected this in favour of TNMM and issued an additional taxable income assessment. The Administrative Tribunal largely upheld the assessment for sales activities, finding the company's net profit margin fell...

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Greece vs X Ltd., May 2021, Administrative Tribunal, Case No 1674/2021

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