A Czech Eli Lilly distributor claimed deductions for marketing service costs under a cost-plus five percent agreement with a related party. The Czech tax authority disallowed the deductions, finding no proven direct link between individual costs and service revenues. The Supreme Administrative Court dismissed the appeal in 2025, confirming that cost-plus pricing logic alone cannot satisfy the statutory benefit test or establish factual deductibility of specific cost items ... Read more

31 May 2025 the Dutch tax authorities issued guidance on the application of the cost-plus method, and specifically the cost basis used. The cost-plus method is one of the methods used to determine arm’s-length prices for mutual supplies of goods and services between affiliated entities. The memorandum focuses on the gross cost-plus method and, in particular, the more commonly used in practice net cost-plus method. The memorandum focuses specifically on the basis on which the cost-plus margin is calculated. The inclusion or exclusion of raw materials from the basis is a particular point of attention. Click here for Unofficial English translation Click here for other translation ... Read more

A Malaysian offshore vessel chartering company paid a related Labuan ship-owner a 35% cost-plus mark-up for charter hire and crew management services. The tax authority rejected the comparables and method selected, issuing additional assessments under Section 140A using the transactional net margin method. The Malaysia High Court in 2024 dismissed the taxpayer's judicial review application, finding the assessments were not unlawful, irrational, or unreasonable ... Read more

A French administrative court of appeal examined whether Alstom Transport SA had correctly priced intra-group services under a cost-sharing agreement and whether it had improperly deducted costs from a contract entered into by a related party. The tax authorities applied a 5% mark-up and disallowed certain deductions. The court sided with Alstom on the mark-up issue but upheld the disallowance of costs linked to the 2008 Brazilian contract ... Read more

UFI Filters SpA paid related Chinese companies for filter supplies using cost-plus mark-ups. Italian tax authorities challenged the arm's length nature of those mark-ups using a benchmark of six comparables. After mixed lower court rulings, Italy's Supreme Court dismissed the tax authority's appeal in April 2024, upholding the Regional Tax Commission's finding that the comparable companies were insufficiently comparable under the cost-plus method ... Read more

Mercer Consulting India paid a related party for administrative services, which were included in the cost base used to calculate its cost-plus remuneration for IT-enabled services. The Indian tax authorities disallowed these deductions, but the Income Tax Appellate Tribunal and the High Court of New Delhi ruled in 2024 that removing costs from the base without adjusting the recoverable amount would erode the tax base, deciding in favour of the taxpayer ... Read more

A Dutch subsidiary of a Norwegian fertilizer group disputed two issues before the Dutch Supreme Court in 2023: whether a factually effective currency hedge sufficed for coherent valuation of USD receivables and payables, and whether transfer prices under supply and distribution agreements with a Swiss group company were arm's length. The court decided in favour of the tax authority on both points ... Read more

A Polish subsidiary reported a loss of over PLN 1.3 million for 2012, which tax authorities reduced after finding undervalued income from related-party transactions totalling PLN 234,019. The Administrative Court initially dismissed the company's complaint. On appeal, Poland's Supreme Administrative Court overturned the lower court's decision in June 2022 and remanded the case for re-examination, finding the transfer pricing methodology required further scrutiny ... Read more

BMW India Financial Services received IT support services from its parent BMW AG, priced at cost plus a 5% markup. The Indian tax authorities disallowed the markup, citing no contractual basis. On appeal, the Income Tax Appellate Tribunal set aside the assessment, finding the 5% markup acceptable under international guidelines and EU Joint Transfer Pricing Forum guidance on intra-group low-value-adding services ... Read more

In some intra-group transactions, the cost of funds approach may be used to price loans where capital is borrowed from an unrelated party which passes from the original borrower through one or more associated intermediary enterprises, as a series of loans, until it reaches the ultimate borrower. In such cases, where only agency or intermediary functions are being performed, as noted at paragraph 7.34, “it may not be appropriate to determine the arm’s length pricing as a mark-up on the costs of the services but rather on the costs of the agency function itself.” ... Read more

The cost plus mark-up of the supplier in the controlled transaction should ideally be established by reference to the cost plus mark-up that the same supplier earns in comparable uncontrolled transactions (“internal comparable”). In addition, the cost plus mark-up that would have been earned in comparable transactions by an independent enterprise may serve as a guide (“external comparable”) ... Read more

Oriflame Software sought to deduct non-standard costs including visa expenses, representation costs, and penalties by relying on a cost-plus transfer pricing method under Czech tax law. The tax authority disallowed the deductions, finding no direct link between the costs and taxable revenues. The Czech Supreme Administrative Court dismissed the appeal in 2021, confirming that cost-plus markup alone does not establish the required connection between expenditure and revenue generation ... Read more

A Dutch company providing transportation and support services for oil and gas was subject to information requests by the Dutch tax authority, which suspected related-party affiliation under Section 8b of the Corporate Income Tax Act. The taxpayer argued the requests violated its right against self-incrimination. The District Court ruled in favour of the tax authority in 2021, finding the information requests lawful and dismissing the nemo tenetur argument as premature ... Read more

A Romanian manufacturer and distributor in the Electrolux group was assessed by tax authorities after reporting consistent losses while the wider group remained profitable. Authorities applied a benchmark study comparing net profit margins against independent household appliance traders, with adjustments for depreciation and extraordinary costs. Romania's Supreme Administrative Court remanded the case for reexamination in November 2020, finding the comparability analysis required further review ... Read more

Shell Services Asia Sdn Bhd participated in a Shell Group Cost Contribution Arrangement for FY 2012–2016. Malaysian tax authorities recharacterised the arrangement as intra-group services and imposed a cost-plus markup, resulting in significant additional assessments. The company challenged the statutory powers of the authorities before the Malaysia High Court. In November 2019, the Court dismissed the appeal, ruling solely on jurisdictional grounds without addressing the merits of the tax assessment ... Read more

A Polish manufacturing subsidiary claimed a loss of over PLN 1.3 million in 2012, but tax authorities found that actual mark-ups applied in related-party transactions differed significantly from the documented TNMM rates of 4% and 8%. The company failed to explain the discrepancy. The Administrative Court dismissed the complaint in 2019, upholding the authority's reduction of the declared loss by PLN 234,019.90 ... Read more

The cost plus mark-up of the supplier in the controlled transaction should ideally be established by reference to the cost plus mark-up that the same supplier earns in comparable uncontrolled transactions (“internal comparable”). In addition, the cost plus mark-up that would have been earned in comparable transactions by an independent enterprise may serve as a guide (“external comparable”) ... Read more

A Vienna subsidiary of a German parent in weighing technology was remunerated on a cost-plus basis for sales agent and service activities. The Austrian tax authority challenged whether the 5% mark-up was arm's length. The Unabhängiger Finanzsenat in 2007 ruled mostly in favour of the tax authority, finding the applied mark-ups did not consistently meet the arm's length standard under a comparable cost-plus analysis ... Read more

A Dutch holding company paid its Hong Kong procurement subsidiary a 10% mark-up on purchase prices, applying the CUP method to justify the arrangement. The Dutch tax authority challenged this, favouring a cost-plus approach instead. The District Court in 2007 ruled in favour of the tax authority, rejecting the CUP method as inapplicable and upholding a 10% cost-plus surcharge on the Hong Kong entity's operating costs ... Read more

A Dutch group member operating as a centralised purchasing office retained profits far exceeding its functions and risks. The Dutch tax authority challenged the profit allocation, arguing discounts earned through group buying power should be distributed proportionally. The Netherlands Supreme Court upheld the tax authority's position in 2004, ruling that profits beyond a 5% cost-plus markup on procurement costs must be allocated to group members according to their contribution of purchasing volume ... Read more