Tag: Comparable companies

TPG2022 Chapter III paragraph 3.37

The transactional focus of transfer pricing methods and the question of a possible aggregation of the taxpayer’s controlled transactions are discussed at paragraphs 3.9-3.12. A different question is whether non- transactional third party data can provide reliable comparables for a taxpayer’s controlled transactions (or set of transactions aggregated consistently with the guidance at paragraphs 3.9-3.12). In practice, available third party data are often aggregated data, at a company-wide or segment level, depending on the applicable accounting standards. Whether such non- transactional third party data can provide reliable comparables for the taxpayer’s controlled transaction or set of transactions aggregated consistently with the guidance at paragraphs 3.9-3.12 depends in particular on whether the third party performs a range of materially different transactions. Where segmented data are available, they can provide better comparables than company-wide, non-segmented data, because of a more transactional focus, although it is recognised that segmented data can raise issues in relation to the allocation of expenses to various segments ... Read more
Denmark vs Tetra Pak Processing Systems A/S, April 2021, Supreme Court, Case No BS-19502/2020-HJR

Denmark vs Tetra Pak Processing Systems A/S, April 2021, Supreme Court, Case No BS-19502/2020-HJR

The Danish tax authorities had issued a discretionary assessment of the taxable income of Tetra Pak Processing Systems A/S due to inadequate transfer pricing documentation and continuous losses. Judgement of the Supreme Court The Supreme Court found that the TP documentation provided by the company did not comply to the required standards. The TP documentation did state how prices between Tetra Pak and the sales companies had been determined and did not contain a comparability analysis, as required under the current § 3 B, para. 5 of the Tax Control Act and section 6 of the Danish administrative ordinance regarding transfer pricing documentation. Against this background, the Supreme Court found that the TP documentation was deficient to such an extent that it had to be equated with missing documentation. The Supreme Court agreed that Tetra Pak’s taxable income for FY 2005-2009 could be determined on a discretionary basis. According to the Supreme Court Tetra Pak had not proved that the ... Read more
Denmark vs Icemachine Manufacturer A/S, June 2020, National Court, Case No SKM2020.224.VLR

Denmark vs Icemachine Manufacturer A/S, June 2020, National Court, Case No SKM2020.224.VLR

At issue was the question of whether the Danish tax authorities had been entitled to make a discretionary assessment of the taxable income of Icemachine Manufacturer A/S due to inadequate transfer pricing documentation and continuous losses. And if such a discretionary assessment was justified, the question of whether the company had lifted the burden of proof that the tax authorities’ estimates had been clearly unreasonable. The Court ruled that the transfer pricing documentation provided by the company was so inadequate that it did not provide the tax authorities with a sufficient basis for determining whether the arm’s length principle had been followed. The tax authorities had therefore been entitled to make a discretionary assessment of the taxable income. For that purpose the Court found that the tax authorities had been justified in using the TNM method with the Danish company as the tested party, since sufficiently reliable information on the sales companies in the group had not been provided. (In April 2021 ... Read more

TPG2017 Chapter III paragraph 3.37

The transactional focus of transfer pricing methods and the question of a possible aggregation of the taxpayer’s controlled transactions are discussed at paragraphs 3.9-3.12. A different question is whether non- transactional third party data can provide reliable comparables for a taxpayer’s controlled transactions (or set of transactions aggregated consistently with the guidance at paragraphs 3.9-3.12). In practice, available third party data are often aggregated data, at a company-wide or segment level, depending on the applicable accounting standards. Whether such non- transactional third party data can provide reliable comparables for the taxpayer’s controlled transaction or set of transactions aggregated consistently with the guidance at paragraphs 3.9-3.12 depends in particular on whether the third party performs a range of materially different transactions. Where segmented data are available, they can provide better comparables than company-wide, non-segmented data, because of a more transactional focus, although it is recognised that segmented data can raise issues in relation to the allocation of expenses to various segments ... Read more