The tax authority claimed that F. S.A. had underestimated its income from logistics services provided to a related party. They applied the transactional net margin method and issued an assessment for additional taxable income.
However, upon appeal, the Tax Administration Chamber ruled that the comparables used by the tax authorities were inappropriate. F. S.A. specialises in e-grocery logistics, including the distribution, storage, and transport of perishable goods. However, the chosen comparables performed materially different functions involving different assets and risks. The case was sent back to the tax authorities for a new comparability analysis.
The Administrative Court later upheld the annulment and the decision to refer the case back to the tax authorities for a new assessment.
F. S.A. then appealed to the Supreme Administrative Court, arguing that the assessment was time-barred and that the lower court had failed to address the transfer pricing methodology. The company therefore requested that the assessment be annulled in its entirety.
Judgment
The Supreme Administrative Court rejected the limitation and abuse claims, but agreed that the Administrative Court had not examined the substantive transfer pricing issues adequately, particularly the appropriateness of the method and the comparables used. The Court therefore remanded the case.
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