Tag: Benchmark study

Nigeria vs Prime Plastichem Nigeria Limited, February 2020, Tax Appeal Tribunal, Case No TAT/LZ/CIT/015/2017

Nigeria vs Prime Plastichem Nigeria Limited, February 2020, Tax Appeal Tribunal, Case No TAT/LZ/CIT/015/2017

Prime Plastichem Nigeria Limited is a private limited company which engages in the business of trading in imported plastics and petrochemicals. Prime Plastichem Nigeria Limited had applied an internal CUP in determining the arm’s length price of its purchase of petrochemical products from its offshore related party, Vinmar Overseas Limited by comparing the controlled prices of products with the prices whereby the products were sold to third party customers. However, in 2014, Vinmar Overseas Limited did not sell to third party customers in Nigeria and there was no basis for applying the internal CUP. Prime Plastichem Nigeria Limited instead applied the TNMM. In 2016, the Nigerian Tax Authorities reviewed the transfer pricing and disregarded the CUP analysis applied in the 2013 TP documentation, applied TNMM to both 2013 and 2014 transactions, and issued an assessment of ₦1.74 billion. Both parties disagreed on the applicable profit level indicator (PLI) to be adopted in applying the TNMM and the comparables selected in ... Continue to full case
Zambia vs Nestlé Trading Ltd, March 2019, Tax Appeals Tribunal, Case No 2018/TAT/03/DT

Zambia vs Nestlé Trading Ltd, March 2019, Tax Appeals Tribunal, Case No 2018/TAT/03/DT

Nestlé Zambia had reported continuous losses for more than five years. Following an Transfer Pricing audit covering years 2010 – 2014, the tax administration  issued an assessment whereby profits were adjusted to ZMW 56,579,048 resulting in additional taxes of ZMW13,860,103 plus penalties and other levies. The assessment was based on Nestlé Zambia being characterised as a limited risk distributor instead of a full fledged dristributor. Nestlé  Zambia held that the tax administrations characterisation of the entity as a limited risk distributor was incorrect and that the assessment had not been performed in accordance with the arm’s length principle.  The Tribunal ruled in favor of Nestlé, except for it’s position on the characterisation of the entity as a limited risk distributor (ground four cf. the excerp below). “The summary of our findings is  that  there  was  basis  for  initiating  a  transfer pricing audit in this case because as has been stated in  Paragraph  1.129  of  the OECD Guidelines that, “When an associated enterprise ... Continue to full case
Spain vs Ikea, March 2019, Audiencia Nacional (TEAC), Case No SAN 1072/2019

Spain vs Ikea, March 2019, Audiencia Nacional (TEAC), Case No SAN 1072/2019

The tax administration had issued an adjustment to the taxable profit of IKEA’s subsidiary in Spain considering that taxable profit in years 2007, 2008, and 2009 had not been determined in accordance with the arm’s length principle. In 2007 taxable profits had been below the interquartile range and in 2008 and 2009 taxable profits had been within the interquartile range but below the median. In all years taxable profits had been adjusted to the median found in the benchmark study. With respect to 2007 where the profit had been outside the interquartile range, the court held that profits should be adjusted to the lower quartile instead of the median, as argued by the tax administration. The tax administration had not demonstrated comparability defect in the comparability study provided by the taxpayer that justified using the median in the assessment of the arm’s length profit. For 2008 and 2009 where the taxable profit had been within the interquartile range – but ... Continue to full case
Spain vs. Zeraim Iberica SA, June 2018, Audiencia Nacional, Case No. ES:AN:2018:2856

Spain vs. Zeraim Iberica SA, June 2018, Audiencia Nacional, Case No. ES:AN:2018:2856

ZERAIM IBERICA SA, a Spanish subsidiary in the Swiss Syngenta Group (that produces seeds and agrochemicals), had first been issued a tax assessment relating to fiscal years 2006 and 2007 and later another assessment for FY 2008 and 2009 related to the arm’s length price of seeds acquired from Zeraim Gedera (Israel) and thus the profitability of the distribution activities in Spain. The company held that new evidence – an advance pricing agreement (APA) between France and Switzerland – demonstrated that the comparability analysis carried out by the Spanish tax authorities suffered from significant deficiencies and resulted in at totally irrational result, intending to allocate a net operating result or net margin of 32.79% in fiscal year 2008 and 30.81% in 2009 to ZERAIM IBERICA SA when the profitability of distribution companies in the sector had average net margins of 1.59%. The tax authorities on there side argued that the best method for pricing the transactions was the Resale Price ... Continue to full case
France vs GE Healthcare Clinical Systems, June 2018, CE n° 409645

France vs GE Healthcare Clinical Systems, June 2018, CE n° 409645

In this case, the French tax authorities questioned the method implemented by GE Healthcare Clinical Systems to determine the purchase price of the equipment it was purchasing from other General Electric subsidiaries in the United States, Germany and Finland for distribution in France. The method used by the GE Group for determining the transfer prices was to apply a margin of 5% to all direct and indirect production costs borne by the foreign group suppliers. For the years 2007, 2008 and 2009 the tax authorities applied a TNM-method based on a study of twenty-six comparable companies. The operating results of GE Healthcare France was then determined by multiplying the median value of the ratio “operating result/turnover” from the benchmark study to the turnover in GE Healthcare Clinical Systems. The additional profit was declared and qualified as constituting an indirect transfer of profits to the related party suppliers in the General Electric Group. The GE Group disagreed and brought the case ... Continue to full case
Sweden vs. Absolut Company AB, Jan 2018, Administrative Court, No. 1610-16

Sweden vs. Absolut Company AB, Jan 2018, Administrative Court, No. 1610-16

In 2016 the Swedish Tax Tribunal ruled against the tax administration in the case of The Absolut (vodka) Company AB. The Administrative Court of Appeal has now overturned the Tribunal’s ruling and consequently SEK 247 mio. are now added to the taxable income of The Absolut Company AB. The Swedish tax administration found that The Absolut Company AB sold Absolut Vodka below the arm’s length price to a group company – The Absolut Spirit Company Inc. (ASCI). Furthermore, the swedish company acquired distribution services from ASCI at a price above the arm’s length price. The Court adresses: – timing of data and information in a Benchmarking search – use of interquartile range or full range – use of multible years data – the issue of hindsight Click here for translation Sweden vs The Absolute Company, Jan 2018, Administrative Court of Appeal, No 1610-16 ... Continue to full case
EU JTPF, March 2017, Report on the Use of Comparables in the EU

EU JTPF, March 2017, Report on the Use of Comparables in the EU

In March 2017 the JTPF agreed the Report on the Use of Comparables in the EU. The report establishes best practices and pragmatic solutions by issuing various recommendations for both taxpayers and tax administrations in the EU and aims at increasing in practice the objectivity and transparency of comparable searches for transfer pricing. JTPF-comparables-October-2016 ... Continue to full case
India vs. Quark Systems Pvt. Ltd. Oct 2014, ITA No.282

India vs. Quark Systems Pvt. Ltd. Oct 2014, ITA No.282

Quark Systems Pvt. is engaged in providing customer support services on behalf of the Quark Group. TNMM had been applied as the most appropriate method for determining arm’s length income. In an audit, the tax administration rejected one of the companies selected as a comparable on the basis that it was in a start-up and had losses for consecutive years. Quark Systems argued that once functional comparability is established, the comparable should not be rejected on grounds such as start-up phase. Quark also argued for rejection of a high-margin comparable on the basis that the company had significant controlled transactions. The Appellate Tribunal upheld the need for a proper functional analysis of the tested party and the comparables in determination of ALP and objected to the selection of comparables merely on the basis of business classification provided in the database. The case was returned to the tax administration India vs Quark Systems Pvt Ltd No 1 2012 ... Continue to full case