Norway vs “Distributor A AS”, March 2021, Tax Board, Case No 01-NS 131/2017

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A fully fledged Norwegian distributor in the H group was restructured and converted into a Limited risk distributor.

The tax authorities issued an assessment where the income of the Norwegian distributor was adjusted to the median in a benchmark study prepared by the tax authorities, based on the “Transactional Net Margin Method” (TNMM method).

Decision of the Tax Board

In a majority decision, the Tax Board determined that the case should be send back to the tax administration for further processing.


…The majority agrees with the tax office that deficits over time may give reason to investigate whether the intra-group prices are set on market terms. However, the case is not sufficiently informed for the tribunal to take a final position on this.

In order to determine whether the income has been reduced as a result of incorrect pricing of intra-group transactions and debits, it is necessary to analyze the agreed prices and contract terms. A comparability analysis will be needed, cf. OECD TPG Chapter III, including especially OECD TPG Section 3.4. to be able to determine whether the intra-group prices have been at arm’s length.

When analysing the controlled transactions and identifying possible comparable uncontrolled transactions, reference must be made to the comparability factors as instructed in OECD TPG section 1.36. A functional analysis must be performed to identify which party to the contractual relationship is to form the basis for the choice of pricing method in accordance with OECD TPG clause 3.4, step 3, as well as a market analysis to identify how this may affect the price in the controlled transactions. See OECD TPG Section 3.7, step 2.

In the majority’s view, the tax office is closest to making the necessary analyzes and assessments of the above matters. The majority therefore believes that the decision should be revoked and sent back to the tax office for possible new processing, cf. the Tax Administration Act § 13-7 (3).”


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