Tag: Comparables

Comparable companies, agreements, or prices that have been identified through a well-defined search for comparable uncontrolled transactions

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

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

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. Excerpts “As we already reasoned in our SAN (2nd) of 6 March 2019 (Rec. 353/2015 ), it is legitimate to resort to what ... Continue to full case

OECD COVID-19 TPG paragraph 85

The materiality of the change in economically relevant circumstances created by the impact of government assistance available in a market may impose additional challenges to the comparability analysis. It may for example render it more difficult to apply the comparability analysis through the utilisation and/or the application of a particular transfer pricing method and search for comparable transactions, on the basis that comparability differences may be exacerbated due to variations in government assistance between comparables or between jurisdictions.40 For example, an uncontrolled transaction that might otherwise have been considered comparable to a particular controlled transaction might be considered not comparable by virtue of the fact that one of the transactions is subject to government assistance while the other is not. A revised strategy, and potentially the use of a corroborating transfer pricing methodology,41 may need to be applied in such cases to take account of the differences in comparability. See Chapter II of this guidance. 40 As the guidance in ... Continue to full case

OECD COVID-19 TPG paragraph 84

The most reliable approach in identifying reliable comparables will be to refer, where possible, to data regarding comparable uncontrolled transactions in the same or comparable geographic market between independent enterprises performing similar functions, assuming similar risks, and using similar assets ... Continue to full case

OECD COVID-19 TPG paragraph 28

This aspect is also relevant in performing the comparability analysis. For instance, assume government intervention forces a taxpayer to close its distribution facilities for three months. In undertaking a benchmark analysis, care should be taken in verifying that comparable enterprises have faced similar restrictions or conditions. Otherwise, it might be necessary to adjust the period over which the comparison is performed (e.g. excluding the economic data corresponding to the three months where the taxpayer was unable to operate). Taxpayers and tax administrations should determine on a case-by-case basis the extent to which these adjustments are necessary in circumstances where the potential differences may not have a material impact on the comparability. In this respect, the guidance in paragraphs 3.50 to 3.52 of the OECD TPG is relevant ... Continue to full case
Chile vs Monsanto Chile S.A, December 2018, Tax Court, Case N° RUC N° 14-9-0000002-3

Chile vs Monsanto Chile S.A, December 2018, Tax Court, Case N° RUC N° 14-9-0000002-3

Monsanto Chile – since 2018 a subsidiary of Bayer – is engaged in production of vegetable seeds and Row Crop seeds. The company uses its own local farmers and contractors, employs some 250 people and hires a maximum of 2,000 temporary workers in the summer months. It receives parental seed from global planners in the US and other countries and then multiplies these seeds in Chile on its own or third-party farms. The seeds are then harvested, processed and shipped to locations specified by global planners. Following an audit of FY 2009-2010 an adjustment was issued related to the profitability obtained in the operations of the “Production” segment (sale of semi-finished products to related parties) and “Research and Development” carried out on behalf of related parties abroad. The adjustment was determined by the tax authorities using the a Net Margin method. The tax authorities found that the income obtained under the production segment and in the research and development business ... Continue to full case
Finland vs Corp, Sep. 2017, HFD No. 2017-146

Finland vs Corp, Sep. 2017, HFD No. 2017-146

/ Comparables, Finland, Services and Fees
Ruling by the Finnish Supreme Administrative Court on a service provider’s obligation to add a mark-up on its costs when calculating an arm’s length service charge. A Plc had provided services to it’s subsidiaryes related to supply chains, marketing and product brand management services, and human resource management services and adb services. Most of A Plc’s income consisted of these service. The amount invoiced corresponded to the servide “production cost”. No mark-up had been added. The tax administration had set a 7% mark-up determined on the basis on a search of comparative companies. The Supreme Administrative Court considered that, in order for A Plc’s service charges to be in accordance with the arm’s length principle, a profit margin should be added. However, the mark-up on the service charges should not have been determined on the basis of the level of profits in third-party comparables. Services provided by independent consultancy companies and parent companies in groups differ from each other in ... Continue to full case

TPG2017 Chapter III paragraph 3.47

The need to adjust comparables and the requirement for accuracy and reliability are pointed out in these Guidelines on several occasions, both for the general application of the arm’s length principle and more specifically in the context of each method. To be comparable means that none of the differences (if any) between the situations being compared could materially affect the condition being examined in the methodology or that reasonably accurate adjustments can be made to eliminate the effect of any such differences. Whether comparability adjustments should be performed (and if so, what adjustments should be performed) in a particular case is a matter of judgment that should be evaluated in light of the discussion of costs and compliance burden at Section C ... Continue to full case

TPG2017 Chapter III paragraph 3.29

There are various sources of information that can be used to identify potential external comparables. This sub-section discusses particular issues that arise with respect to commercial databases, foreign comparables and information undisclosed to taxpayers. Additionally, whenever reliable internal comparables exist, it may be unnecessary to search for external ones, see paragraphs 3.27-3.28 ... Continue to full case
Germany vs "A Investment GmbH", June 2017, Tax Court , Case no 10 K 771/16

Germany vs “A Investment GmbH”, June 2017, Tax Court , Case no 10 K 771/16

A Investment GmbH, acquired all shares of B in May 2012. To finance the acquisition, A Investment GmbH took up a bank loan (term: 5 years; interest rate: 4.78%; secured; senior), a vendor loan (term: 6 years; interest rate: 10%; unsecured; subordinated) and a shareholder loan (term: 9 to 10 years; interest rate: 8%; unsecured; subordinated). The 8 % interest rate on the shareholder loan was determined by A Investment GmbH by applying the CUP method based on external comparables. The German tax authority, found that the interest rate of 8 % did not comply with the arm’s length principle. An assessment was issued where the interest rate was set to 5% based on the interest rate on the bank loan (internal CUP). A Investment GmbH filed an appeal to Cologne Tax Court. The court ruled that the interest rate of the bank loan, 4.78%, was a reliable CUP for setting the arm’s length interest rate of the controlled loan. The ... Continue to full case
Japan vs. Publisher Corp, April 2017, Tokyo District Court, Case No 第267号-56(順号13005)

Japan vs. Publisher Corp, April 2017, Tokyo District Court, Case No 第267号-56(順号13005)

A Japanese company entered into a transaction with a foreing group company to import English-language learning materials into Japan. The learning materials were then resold to Japanese customers. The Japanese tax authority found that the resale price method should be used for setting the arm’s-length price for the transaction. The arm’s-length price for the controlled transaction was the price at which the Japanese company resold the English-language learning materials to customers, minus a normal profit margin multiplied by the price. The “normal profit margin” in this case was found to be the weighted average ratio of gross margin to the total revenue for multiple transactions, where unrelated parties imported the same as the English-language learning materials, or goods of a similar sort, and then resold them to customers. The tax authority held that unrelated parties importing and selling learning materials should be considered comparable transactions, and appropriate adjustments could be made to account for difference. However, an important difference between ... Continue to full case
Japan vs "Banana Corp", April 2013, Tokyo High Court, Case no 229

Japan vs “Banana Corp”, April 2013, Tokyo High Court, Case no 229

A Japanese distributor “Banana Corp” imported Ecuadorian bananas from a group company for wholesale in Japan. The Japanese tax administration ruled that the amount of consideration paid by Japanese distributor had exceeded the arm’s length price and issued an assessment of additional tax and penalties for FY 1999 – 2004. At first Banana Corp brought the case before the regional court who decision in favour of the tax administration. Banana Corp appealed this decision to Tokyo High Court. Tokyo High Court dismissed the appeal and upheld the decision of the regional court. Click here for English Translation Click here for other translation Ban-Co-2013-084405_hanrei ... Continue to full case
Argentina vs Boehringer Ingelheim S.A. , April 2012, Tribunal Fiscal de la Nación, Case No 26713

Argentina vs Boehringer Ingelheim S.A. , April 2012, Tribunal Fiscal de la Nación, Case No 26713

The tax authorities had not contested but have accepted the method (TNMM) used by the company to assess their transactions with related or affiliated parties, the dispute is therefore limited to certain aspects of the application of the methodology. Boehringer had used ROS indicator (operating profit margin) which the tax authorities accepted for the resale function but applied the ROTC indicator (profit margin on costs and expenses) for the manufacturing function. On the use of foreign comparables the tax court held in favor of the company and revoked the adjustment back to the authorities. Click here for English Translation Tribunal Fiscal de la Nación ... Continue to full case
France vs. Novartis Groupe France SA, June 2008 and October 2010, CAA no No 06PA02841 and No 09LY02084

France vs. Novartis Groupe France SA, June 2008 and October 2010, CAA no No 06PA02841 and No 09LY02084

In the Novartis Groupe France SA case, the court stated that if the tax administration intends to base the transfer pricing approach on prices used between other companies or a profit split, it must first demonstrate that the price used by the related companies does not comply with the arm’s-length principle. A search for comparable transactions must be performed. Click here for translation Novataris Groupe France 2008 Se also the later decision of October 2010. Click here for translation Novataris 2010 ... Continue to full case
Argentina vs Aventis Pharma SA, February 2010, Tribunal Fiscal de la Nación, Case No 29,083-I

Argentina vs Aventis Pharma SA, February 2010, Tribunal Fiscal de la Nación, Case No 29,083-I

The principal activity of Aventis Pharma is manufacturing of pharmaceutical products and the secondary activity is the wholesale of pharmaceutical products; In FY 2000 the company carried out various transactions with related companies and based on a transfer pricing study the company concluded that profits were consistent with those obtained by comparable independent parties. Following an audit the tax authorities issued an assessment of additional income. In dispute were: Granting of extraordinary discounts, Reclassification of operating expenses together with related and non-operating expenses, Use of loss making comparables. The Court decided in favour of Aventis “From the above, it appears that the challenges made by the tax authority to the choice of the firm Bentley Pharmaceutical Inc, are unsubstantiated because they are based on the accusation of other manufacturing activities that were not carried out by the aforementioned company but by related companies, at a time when the rule regarding the selection of comparable companies is Article 4(1) of the ... Continue to full case
Japan vs "Banana Corp", April 2009, Tokyo District Court

Japan vs “Banana Corp”, April 2009, Tokyo District Court

The “Banana Group” is based in Ecuador and is engaged in the business of exporting Ecuadorian bananas. The Japanese distributor was part of the Banana Group. An Ecuadorian group company purchases bananas produced on plantations in Ecuador, exports and sells them to another intermediate group company, who in turn sells them to the Japanese distributor for wholesale in Japan. At issue was the arms length price of the bananas imported by the Japanese distributor. The tax administration held that the price paid for the bananas had been to high and issued an assessment for FY 1999-2004. The Japanese company disagreed and brought the case to court. Decision of the Court The Tokyo District court decided in favour of the tax administration and upheld the tax assessment. Click here for English translation Click here for other translation EB 082672_hanrei ... Continue to full case
Argentina vs Laboratorios Bagó S.A. , November 2006, Tribunal Fiscal de la Nación, Case No 16/11/06

Argentina vs Laboratorios Bagó S.A. , November 2006, Tribunal Fiscal de la Nación, Case No 16/11/06

In the case of Laboratorios Bagó S.A. the National Tax Court, rejected an appeal raised on the grounds that the use of information from third party companies by the tax administration violated the tax secrecy enshrined in Article 101 of Law No. 11,683. Decision of the Tax Court The Court stated that the information used by the tax administration to determine the market price was not covered by tax secrecy. The Court also considered that it was correct to have informed the company of the aforementioned information so that it could exercise its right to defense. Click here for English translation AG vs Bago 2006 ... Continue to full case