“Fertilizer B.V.” is part of a Norwegian group that produces, sells and distributes fertiliser (products). “Fertilizer B.V.” is the parent company of a several subsidiaries, including the intermediate holding company [C] BV and the production company [D] BV. The case before the Dutch Supreme Court involves two points of dispute: (i) is a factually highly effective hedge sufficient for mandatory connected valuation of USD receivables and payables? (ii) is the transfer prices according to the supply and distribution agreements between [D] and a Swiss group company (AG) at arm’s length? (i) Factual hedge of receivables and payables “Fertilizer B.V.” had receivables, forward foreign exchange contracts and liabilities in USD at the end of 2012 and 2013. It values those receivables and payables at acquisition price or lower value in use. It recognised currency gains as soon as they were realised and currency losses as soon as a receivable was valued lower or a debt higher. The court has measured dollar ... Read more

42. The facts in this example are the same as those set out in Example 10 with the following additions: At the end of Year 3, Primair stops manufacturing watches and contracts with a third party to manufacture them on its behalf. As a result, Company S will import unbranded watches directly from the manufacturer and undertake secondary processing to apply the R name and logo and package the watches before sale to the final customer. It will then sell and distribute the watches in the manner described in Example 10. As a consequence, at the beginning of Year 4, Primair and Company S renegotiate their earlier agreement and enter into a new long term licensing agreement. The new agreement, to start at the beginning of Year 4, is for five years, with Company S having an option for a further five years. Under the new agreement, Company S is granted the exclusive right within country Y to process, market ... Read more

39. The facts in this example are the same as in Example 9 with the following additions: By the end of Year 3, the R brand is successfully established in the country Y market and Primair and Company S renegotiate their earlier agreement and enter into a new long-term licensing agreement. The new agreement, which is to commence at the beginning of Year 4, is for five years with Company S having an option for a further five years. Under this agreement, Company S agrees to pay a royalty to Primair based on the gross sales of all watches bearing the R trademark. In all other respects, the new agreement has the same terms and conditions as in the previous arrangement between the parties. There is no adjustment made to the price payable by Company S for the branded watches as a result of the introduction of the royalty. Company S’s sales of R brand watches in Years 4 and ... Read more

35. The facts in this example are the same as in Example 9, except that Company S now enters into a three-year royalty-free agreement to market and distribute the watches in the country Y market, with no option to renew. At the end of the three-year period, Company S does not enter into a new contract with Primair. 36. Assume that it is demonstrated that independent enterprises do enter into short-term distribution agreements where they incur marketing and distribution expenses, but only where they stand to earn a reward commensurate with the functions performed, the assets used, and the risks assumed within the time period of the contract. Evidence derived from comparable independent enterprises shows that they do not invest large sums of money in developing marketing and distribution infrastructure where they obtain only a short-term marketing and distribution agreement, with the attendant risk of non-renewal without compensation. The potential short-term nature of the marketing and distribution agreement is such ... Read more

20. Primair, a resident of country X, manufactures watches which are marketed in many countries around the world under the R trademark and trade name. Primair is the registered owner of the R trademark and trade name. The R name is widely known in countries where the watches are sold and has obtained considerable economic value in those markets through the efforts of Primair. R watches have never been marketed in country Y, however, and the R name is not known in the country Y market. 21. In Year 1, Primair decides to enter the country Y market and incorporates a wholly owned subsidiary in country Y, Company S, to act as its distributor in country Y. At the same time, Primair enters into a long-term royalty-free marketing and distribution agreement with Company S. Under the agreement, Company S is granted the exclusive right to market and distribute watches bearing the R trademark and using the R trade name in ... Read more

B Restructuring LDA was a distributor within the E group. During FY 2014-2016 a number of manufacturing entities within the group terminated distribution agreements with B Restructuring LDA and subsequently entered into new Distribution Agreements, under similar terms, with another company of the group C. These events were directed by the Group’s parent company, E. The tax authorities was of the opinion, that if these transaction had been carried out in a free market, B would have received compensation for the loss of intangible assets – the customer portfolio and the business and market knowledge (know-how) inherent to the functions performed by B. In other words, these assets had been transferred from B to C. The tax authorities performed a valuation of the intangibles and issued an assessment of additional taxable income resulting from the transaction. E Group disagreed with the assessment as, according to the group, there had been no transaktion between the B and C. Furthermore the group ... Read more

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 ... Read more

Samsung Electronics Baltic Ltd, is a subsidiary of Samsung Electronics Co. Ltd, which was established at the end of 2007. On 1 January 2008, Samsung Electronics Baltic and Samsung Electronics Co. Ltd entered into Distribution Agreement, under which Samsung Electronics Baltic was appointed as the distributor in the Baltic States of the products manufactured by Samsung Electronics Co. Ltd and its subsidiaries (‘the Distribution Agreement’). In 2008 and 2009, Samsung Electronics Baltic carried out business activities in the territory of Latvia, Lithuania and Estonia distributing the goods received from Samsung Electronics Co. Ltd under the Distribution Agreement. Samsung Electronics Baltic also provided warranty services for the goods sold by engaging service providers for that purpose, namely merchants who carried out repairs of the goods (‘Repair Services’). On 2 January 2008, Samsung Electronics Baltic concluded a Warranty Assumption Agreement (‘the Warranty Assumption Agreement’) with its sister company, Samsung Electronics Overseas B.V. (‘Dutch Samsung’), which was the distributor of Samsung Electronics Co ... Read more

42. The facts in this example are the same as those set out in Example 10 with the following additions: At the end of Year 3, Primair stops manufacturing watches and contracts with a third party to manufacture them on its behalf. As a result, Company S will import unbranded watches directly from the manufacturer and undertake secondary processing to apply the R name and logo and package the watches before sale to the final customer. It will then sell and distribute the watches in the manner described in Example 10. As a consequence, at the beginning of Year 4, Primair and Company S renegotiate their earlier agreement and enter into a new long term licensing agreement. The new agreement, to start at the beginning of Year 4, is for five years, with Company S having an option for a further five years. Under the new agreement, Company S is granted the exclusive right within country Y to process, market ... Read more

39. The facts in this example are the same as in Example 9 with the following additions: By the end of Year 3, the R brand is successfully established in the country Y market and Primair and Company S renegotiate their earlier agreement and enter into a new long-term licensing agreement. The new agreement, which is to commence at the beginning of Year 4, is for five years with Company S having an option for a further five years. Under this agreement, Company S agrees to pay a royalty to Primair based on the gross sales of all watches bearing the R trademark. In all other respects, the new agreement has the same terms and conditions as in the previous arrangement between the parties. There is no adjustment made to the price payable by Company S for the branded watches as a result of the introduction of the royalty. Company S’s sales of R brand watches in Years 4 and ... Read more

35. The facts in this example are the same as in Example 9, except that Company S now enters into a three-year royalty-free agreement to market and distribute the watches in the country Y market, with no option to renew. At the end of the three-year period, Company S does not enter into a new contract with Primair. 36. Assume that it is demonstrated that independent enterprises do enter into short-term distribution agreements where they incur marketing and distribution expenses, but only where they stand to earn a reward commensurate with the functions performed, the assets used, and the risks assumed within the time period of the contract. Evidence derived from comparable independent enterprises shows that they do not invest large sums of money in developing marketing and distribution infrastructure where they obtain only a short-term marketing and distribution agreement, with the attendant risk of non-renewal without compensation. The potential short-term nature of the marketing and distribution agreement is such ... Read more

20. Primair, a resident of country X, manufactures watches which are marketed in many countries around the world under the R trademark and trade name. Primair is the registered owner of the R trademark and trade name. The R name is widely known in countries where the watches are sold and has obtained considerable economic value in those markets through the efforts of Primair. R watches have never been marketed in country Y, however, and the R name is not known in the country Y market. 21. In Year 1, Primair decides to enter the country Y market and incorporates a wholly owned subsidiary in country Y, Company S, to act as its distributor in country Y. At the same time, Primair enters into a long-term royalty-free marketing and distribution agreement with Company S. Under the agreement, Company S is granted the exclusive right to market and distribute watches bearing the R trademark and using the R trade name in ... Read more

Nordea Nordic Baltic AB was the manager of funds and a central distributor in Sweden of certain funds registered in Luxembourg. The company entered into a new distribution agreement that replaced two previous agreements. According to this new agreement, the remuneration to the company was lower than under the previous agreement. The company considered that the compensation under the old agreements had been too high which therefore compensated for (set-off) the lower compensation received according to the new agreement. The Court of Appeal stated that the set-off principle must be applied with caution. A basic precondition should be that these are transactions that have arisen within the framework of the same contractual relationship. It did not matter if the company was overcompensated by another party to the agreement. Any overcompensation in previous years from the same contracting party could also not be taken into account as it was the result of a different pricing strategy within the framework of another ... Read more

A Danish production company terminated a 10-year license and distribution agreement with a group distribution company one year prior to expiry of the agreement. The distribution agreement was transferred to another group company and the new distribution company agreed as a successor in interest to pay a "termination fee" to the former distribution company. However, the termination fee was paid by the Danish production company and the amount was depreciated in the tax-return. The Danish company claimed that it was a transfer pricing case and argued that the tax administration could only adjust agreed prices and conditions of the agreement if the requirements for making a transfer pricing correction were met. The Supreme Court stated that the general principles of tax law in the State Tax Act §§ 4-6 also applies to the related companies. Hence, the question was whether the termination fee was held for "acquiring, securing and maintaining the applicant's income", cf. the state tax act § 6 ... Read more