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Poland vs “Cans Corp”, September 2019, Provincial Administrative Court i Szczecin, Case no SA/Sz155/19

Posted on September 24, 2019 | By Courts of Poland | No comments

Category: Benchmark, Range and Median, Comparability Analysis, Transfer Pricing Methods | Tag: Benchmark study, Comparability, Interquartile range (IQR), Manufacturing, Median, Transfer pricing methods

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At issue was the remuneration of a Polish manufacturing subsidiary “Cans Corp” in an international group dealing in the production and sale of metal packaging for food products, including beverage cans, food cans, household cans and metal closures.

The tax authorities had issued a tax assessment for based on a benchmark study where the profitability of “Cans Corp” was compared to the profitability (EBIT margin) of six comparable entities. Based on these data the tax authorities concluded that “Cans Corp” had underreported profits obtained from the sale of goods to related entities.

Decision of the Administrative Court

The Court upheld the decision of the tax authorities concerning income for the tax year from 01/01/2012 to 31/12/2012.

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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 3.65Generally speaking, a loss-making uncontrolled transaction should trigger further investigation in order to establish whether or not it can be a comparable. Circumstances in which loss-making transactions/ enterprises should be excluded from the list of comparables include cases where losses do not reflect normal business conditions, and where the losses...

TPG2022 Chapter III paragraph 3.64An independent enterprise would not continue loss-generating activities unless it had reasonable expectations of future profits. See paragraphs 1.149-1.151. Simple or low risk functions in particular are not expected to generate losses for a long period of time. This does not mean however that loss-making transactions can never be comparable....

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 II paragraph 2.15Following the principles in Chapter I, an uncontrolled transaction is comparable to a controlled transaction (i.e. it is a comparable uncontrolled transaction) for purposes of the CUP method if one of two conditions is met: a) none of the differences (if any) between the transactions being compared or between the...

Iceland vs Íslenska kalkþörungafélagið ehf., February 2026, Court of Appeal, Case No 213/2025Íslenska kalkþörungafélagið ehf. ("the Icelandic Limestone Algae Company") operated a calcified algae factory in Iceland, harvesting seaweed from the seabed, cleaning, drying and exporting it almost entirely to its Irish parent company, Marigot Ltd. Marigot Ltd. further processed the raw material in...

TPG2022 Chapter III paragraph 3.79The use of multiple year data does not necessarily imply the use of multiple year averages. Multiple year data and averages can however be used in some circumstances to improve reliability of the range. See paragraphs 3.57-3.62 for a discussion of statistical tools....

TPG2022 Chapter III paragraph 3.66A similar investigation should be undertaken for potential comparables returning abnormally large profits relative to other potential comparables....

Supplemental Guidance

Portugal vs “A-Contract Manufacturer LDA”, December 2020, CAAD Administrative Tribunal, Case No 808/2019-TA Portuguese contract manufacturer producing coffee machines and irons for its German parent was audited by the tax authority, which found its results fell below arm's length and issued an adjustment using interquartile range and median statistical tools. The taxpayer challenged the assessment before Portugal's CAAD arbitration tribunal in 2020,...

Spain vs Ferroli España, S.L.U., May 2023, Audiencia Nacional, Case No 3400/2023 – ECLI:EN:AN:2023:3400A Spanish manufacturer of cookers and heaters reported negative profit margins on intra-group transactions in 2010 and 2011, attributing losses to the financial crisis. The tax authority adjusted profits to the median using the TNMM. The Audiencia Nacional largely upheld the assessment in 2023 but reduced the adjustment to the...

Colombia vs Masterfoods Colombia Ltda, Effem Colombia Ltda, February 2024, Supreme Administrative Court, Case No. 08001-23-33-000-2015-02445-01 (24364)Colombia's Supreme Administrative Court upheld the annulment of a transfer pricing assessment against Masterfoods Colombia for FY2008. The tax authority had replaced the taxpayer's transactional net margin method with the cost-plus method and adjusted results to the median of the interquartile range. The court found the authority's method and comparables...

Romania vs “Broker” A SRL, September 2016, Supreme Administrative Court, Case No 3818/2019A Romanian company challenged tax authority adjustments after an audit found deficiencies in its comparability study, covering royalties, support services, and strategic management fees. The tax authority replaced the study and disallowed carried-forward losses. Romania's Supreme Administrative Court ruled in favour of the tax authority in 2019, upholding the revised...

Spain vs Transalliance Iberica SA, November 2022, Audiencia Nacional, Case No SAN 5336/2022 – ECLI:EN:AN:2022:5336A Spanish transport company priced controlled transactions using gross margin comparisons, but tax authorities rejected this method due to comparability issues and applied TNMM, adjusting profits to the median. The Audiencia Nacional largely upheld the tax authority's approach in 2022, but ruled that adjustment to the median required established comparability...

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...

Romania vs SC A SRL, October 2016, Supreme Administrative Court, Case No 2651/2016A Romanian company claimed tax deductions for costs paid to its Italian affiliate, C SpA, but failed to adequately justify its transfer prices. Following a tax audit, authorities applied the transactional net margin method to adjust the pricing. The taxpayer challenged the assessment in court. Romania's Supreme Administrative Court upheld...

Romania vs “Electrolux” A. SA, November 2020, Supreme Administrative Court, Case No 6059/2020A Romanian manufacturer and distributor in the Electrolux group was assessed by tax authorities after reporting consistent losses while the wider group remained profitable. Authorities applied a benchmark study comparing net profit margins against independent household appliance traders, with adjustments for depreciation and extraordinary costs. Romania's Supreme Administrative Court remanded...

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Poland vs “Cans Corp”, September 2019, Provincial Administrative Court i Szczecin, Case no SA/Sz155/19

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