The tax authorities had disallowed royalty payments of 3% of net sales from Cussons Indonesia to its parent company in the UK, PZ Cussons International Ltd.
According to the tax authorities Cussons had been unable to prove that the payment was at arm’s-length, as well as unable to provide transfer pricing documentation supporting the pricing.
Cussons claimed that the royalty payments was supported with documents such as a royalty agreement, documentation for VAT payments, and withholding tax on royalty.
Judgement of the Tax Court
The court decided in favour of Cussons and set aside the assessment of the tax authorities