Spain vs BIOMERIEUX ESPAÑA SA, February 2021, National Court, Case No 2021:416

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BIOMERIEUX ESPAÑA SA is active in the business of clinical and biological analysis, production, distribution, training and technical assistance. Likewise, the provision of computer services and, in particular, the computer management of laboratories.

Following an audit the tax authorities found that the controlled prices agreed for the acquisition of instruments and consumables between bioMérieux España and its related entities, bioMérieux SA and bioMérieux Inc, did not provided bioMérieux España with an arm’s length return on is controlled activities.

A tax assessment was issued for FY 2008 on the basis af a thorough critical analysis of the benchmark study provided by the BIOMERIEUX, and detailed reasoning and analysis in regards to comparability and market developments.

Judgement of the National Court

The Audiencia Nacional dismissed the appeal of Biomerieux España SA and decided in favour of the tax authorities.

“As we already reasoned in our SAN (2nd) of 6 March 2019 (Rec. 353/2015 ), it is legitimate to resort to what the Guideline calls “measures of central tendency”, but whoever resorts to them has the burden of reasoning and setting out the reasons that lead to their application.
In our opinion, the Inspectorate, in this case, does reason and state the reasons.

2008 was a year of outstanding economic results for the bioMérieux Group, as well as for bioMérieux Spain in terms of sales growth, according to the report. However, this situation of increased results for the Group is not reflected in the income statement of bioMérieux Spain’s distribution business, whose profitability fell from 8% in 2007 to 4.47% in 2008. This is not consistent either with the Group’s results or with the market remuneration for performing the same functions in 2007 and 2008, a market which has not been shown to have seen its margins of free competition reduced.”

It is true that, as stated in point 1.13 of the Guidelines, the objective sought by the rule is “to arrive at a reasonable approximation of what would be an arm’s length result based on reliable information. At this point, it should also be remembered that transfer pricing is not an exact science, but requires value judgements on the part of both the tax administration and taxpayers”.
Precisely for this reason, the correct thing to do is to proceed as the inspectorate did, i.e. to ask the appellant to justify the price set and to analyse the reasonableness of the price obtained. In this sense, it is reasonable to require the appellant to keep the information regarding the criteria they have used to set the transfer price and the documentation that has justified them or, at least, to be able to precisely identify the sources from which they have obtained the information. This will allow for verification. In this sense, paragraph 3.3 of the OECD Guidelines “considers it good practice for a taxpayer that uses comparables to justify its transfer prices ( ) to provide the other interested party with the supporting information that allows it to assess the reliability of the comparables used”.

All these reasons, assessed as a whole, lead us to conclude that the detailed analysis carried out by the Inspectorate allows us to conclude that the calculations made by the Inspectorate are closer to the purpose of the rule, that is to say, to the search for the price set at arm’s length, than those provided by the appellant.

The applicant submits that the Spanish authorities have reached an amicable agreement with the French authorities and have fixed the agreed mark-up as market rate at 6,20 %. What is sought is to apply the same margin in relation to the US company, in respect of which there is no amicable procedure.
The tax authorities opposes this argument, reasoning that the transfer price agreed with France in an amicable procedure is the result of a negotiation between sovereign entities involving considerations of international public law, and therefore its results cannot be extrapolated.”

The agreement obtained is an agreement that binds the negotiating States, but cannot extend its effects to relations with another State. The fact that the Kingdom of Spain, for reasons unknown to us, has reached an agreement with the Republic of France does not mean that the transfer price fixed by the Spanish administration is not correct, but simply that the States have given in on their respective claims and reached an agreement, the effects of which cannot be extrapolated.

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