X BV in the Netherlands was a wholesaler in garden related (gift) articles.
Customers are located in the Netherlands and abroad (especially in Western Europe, the United States and Canada).
Procurement of the products is mainly done in China. Delivery of the products is made directly by the producer to [X] BV or to its other clients.
As compensation for procurement activities performed by the [X Limited] in Hong Kong, X group BV pays a 10% surcharge on the purchase price paid by [X Limited] to its Chinese suppliers. This surcharge is passed on in the cost price of the products.
The tax administration held that the compensation [X Limited] receives for its procurement activities is (much) too high.
The District Court disagreed and decided in favor of X Group BV.Netherland vs BV 2007