GE Medical Systems Italia S.p.A. is an Italian company engaged in the sale and installation of medical diagnostic equipment and the provision of technical assistance and maintenance services, primarily to hospitals and private clinics in Italy. The company, fiscally resident in France, is part of th ... Read more

Nissan Chile SpA, a wholly-owned subsidiary of Nissan Motor Co. Ltd. (Japan), was incorporated in Chile in August 2014 to take over the direct distribution of Nissan-branded vehicles and spare parts previously handled by an independent distributor, Distribuidora Automotriz Marubeni Limitada. Operati ... Read more

A Korean subsidiary of a Dutch electronics multinational was assessed for excess transfer prices paid to foreign related parties across medical equipment, household appliances, and lighting segments. Tax authorities aggregated maintenance services with product sales and selected comparables based on domestic service businesses. The Korean Supreme Court remanded the case for reexamination in 2025, finding the comparable selection methodology required further review ... Read more

A Korean subsidiary importing medical equipment, appliances and lighting products from related parties was audited after tax authorities rejected its business-line segmentation and functional analysis. Authorities reclassified activities and selected new comparables, issuing additional assessments. The Korean High Court ruled in favour of the taxpayer in August 2024, finding the authority's segmentation and comparable selection flawed ... Read more

A Malaysian subsidiary of Thomson Reuters acted as a local distributor of information and dealing services, applying TNMM with a 2% target operating margin. The tax authority rejected five comparables, added three local ones, and included SG&A costs in the margin calculation. The Special Commissioner of Income Tax upheld the authority's assessment in 2023, dismissing the taxpayer's reliance on pan-Asian comparables and excluding extraordinary costs ... Read more

A French generic pharmaceutical distributor paid royalties to its Danish parent and a related UK entity in 2010 and 2011. French tax authorities argued the payments constituted indirect profit transfers, as the taxpayer had not demonstrated the reality of services received. The Court of Administrative Appeal dismissed the authorities' appeal in 2023, upholding the first instance ruling in favour of SAS Arrow Génériques ... Read more

Eli Lilly ČR distributed pharmaceuticals at a loss, offset by marketing service fees from its Swiss principal, Eli Lilly Export S.A. The Czech tax authority assessed additional VAT, arguing the marketing services were not exempt from Czech VAT. Both the Administrative Court and the Supreme Administrative Court dismissed Eli Lilly's appeals in 2023, upholding the VAT assessment on the intra-group service income ... Read more

A Panamanian distributor used the Transaction Net Margin Method to price related-party transactions but excluded USD 6.9 million in ordinary general and administrative costs by classifying them as extraordinary expenses. The tax authority found this understated the operating margin, pushing results outside the arm's length range, and adjusted profits to the median of 4.39%. Panama's Administrative Tax Tribunal upheld the adjustment in March 2023 ... Read more

A Peruvian mining distributor faced tax authority adjustments challenging its arm's length remuneration for distribution activities and the pricing of intra-group low value-adding services, which local rules cap at a 5% margin. The Peru Tax Court in February 2023 overturned the adjustment on distribution remuneration in favour of the taxpayer but upheld the assessment on intra-group services, confirming the 5% margin restriction under Peruvian transfer pricing rules ... Read more

A Panamanian tech distributor received a USD 1.4 million transfer pricing adjustment for FY2013 after tax authorities found inconsistencies in reported transactions, improper inclusion of other income in the TNMM operating margin, and flawed comparability adjustments. The Panama Tax Tribunal upheld the assessment in January 2023, confirming that the rejected comparables and disallowed adjustments placed the company's profit margin outside the interquartile range, warranting adjustment to the median ... Read more

Eli Lilly ČR, acting as a limited-risk distributor and marketing services provider to its Swiss principal, was assessed VAT on marketing fees by Czech tax authorities, who disputed the place of supply classification. The District Court upheld the assessments, but in December 2022 the Czech Supreme Administrative Court reversed that decision, annulling the tax assessments and ruling in favour of the taxpayer ... Read more

A Greek pharmaceutical distributor applied the resale price method for its intra-group sales and service activities, but the tax authorities rejected this in favour of TNMM and issued an additional taxable income assessment. The Administrative Tribunal largely upheld the assessment for sales activities, finding the company's net profit margin fell outside the interquartile range, but annulled the adjustment for service activities where remuneration was within the arm's length range ... Read more

For example, a tested party engaged in the marketing and distribution of goods purchased in controlled transactions may have developed marketing intangibles in its geographic area of operation, including customer lists, customer relationships, and customer data. It may also have developed advantageous logistical know-how or software and other tools that it uses in conducting its distribution business. The impact of such intangibles on the profitability of the tested party should be considered in conducting a comparability analysis ... Read more

In a transfer pricing analysis where the most appropriate transfer pricing method is the resale price method, the cost-plus method, or the transactional net margin method, the less complex of the parties to the controlled transaction is often selected as the tested party. In many cases, an arm’s length price or level of profit for the tested party can be determined without the need to value the intangibles used in connection with the transaction. That would generally be the case where only the non-tested party uses intangibles. In some cases, however, the tested party may in fact use intangibles notwithstanding its relatively less complex operations. Similarly, parties to potentially comparable uncontrolled transactions may use intangibles. Where either of these is the case, it becomes necessary to consider the intangibles used by the tested party and by the parties to potentially comparable uncontrolled transactions as one comparability factor in the analysis ... Read more

This section provides supplemental guidance for applying the rules of Chapters I – III in situations where one or both parties to a controlled transaction uses intangibles in connection with the sale of goods or the provision of services, but where no transfer of intangibles or interests in intangibles occurs. Where intangibles are present, the transfer pricing analysis must carefully consider the effect of the intangibles involved on the prices and other conditions of controlled transactions ... Read more

The need to consider the use of intangibles by a party to a controlled transaction involving a sale of goods can be illustrated as follows. Assume that a car manufacturer uses valuable proprietary patents to manufacture the cars that it then sells to associated distributors. Assume that the patents significantly contribute to the value of the cars. The patents and the value they contribute should be identified and taken into account in the comparability analysis of the transaction consisting in the sales of cars by the car manufacturer to its associated distributors, in selecting the most appropriate transfer pricing method for the transactions, and in selecting the tested party. The associated distributors purchasing the cars do not, however, acquire any right in the manufacturer’s patents. In such a case, the patents are used in the manufacturing and may affect the value of the cars, but the patents themselves are not transferred ... Read more

Eli Lilly ČR imported and distributed pharmaceuticals purchased from a Swiss principal, reporting marketing service fees as VAT-exempt supplies outside the Czech Republic. The tax authority assessed VAT on those fees for FY 2011. The Prague District Court dismissed Eli Lilly's appeal in 2019, ruling that the marketing services were ancillary to the main distribution activity and therefore subject to Czech VAT ... Read more

Fulford India imported active pharmaceutical ingredients from related group companies and applied the cost plus method to determine arm's length prices. The Indian tax authority challenged this, asserting the CUP method was more appropriate. The Income Tax Appellate Tribunal dismissed Fulford's appeal in 2019, upholding the CUP method and remitting the case for further adjustments to be examined by the assessing officer ... Read more

An Italian company contested a transfer pricing assessment in which the tax authority switched its profit level indicator from return on sales to return on assets between the pre-assessment and assessment phases. The Regional Tax Commission upheld the Provincial Tax Commission's 2015 ruling, annulling the assessment and finding it unlawful to substitute a different PLI in the assessment phase without prior exploration of the original approach ... Read more

A Bulgarian pharmaceutical wholesale distributor challenged a tax assessment covering FY2009 and FY2010, disputing transfer pricing adjustments on pharmaceutical products sold to a related party at prices more than half their acquisition cost, and a related-party loan bearing a below-market interest rate. The Supreme Administrative Court dismissed the appeal in January 2018, upholding the tax authority's findings and confirming the comparable uncontrolled price method was correctly applied ... Read more

For example, a tested party engaged in the marketing and distribution of goods purchased in controlled transactions may have developed marketing intangibles in its geographic area of operation, including customer lists, customer relationships, and customer data. It may also have developed advantageous logistical know-how or software and other tools that it uses in conducting its distribution business. The impact of such intangibles on the profitability of the tested party should be considered in conducting a comparability analysis ... Read more

In a transfer pricing analysis where the most appropriate transfer pricing method is the resale price method, the cost-plus method, or the transactional net margin method, the less complex of the parties to the controlled transaction is often selected as the tested party. In many cases, an arm’s length price or level of profit for the tested party can be determined without the need to value the intangibles used in connection with the transaction. That would generally be the case where only the non-tested party uses intangibles. In some cases, however, the tested party may in fact use intangibles notwithstanding its relatively less complex operations. Similarly, parties to potentially comparable uncontrolled transactions may use intangibles. Where either of these is the case, it becomes necessary to consider the intangibles used by the tested party and by the parties to potentially comparable uncontrolled transactions as one comparability factor in the analysis ... Read more

This section provides supplemental guidance for applying the rules of Chapters I – III in situations where one or both parties to a controlled transaction uses intangibles in connection with the sale of goods or the provision of services, but where no transfer of intangibles or interests in intangibles occurs. Where intangibles are present, the transfer pricing analysis must carefully consider the effect of the intangibles involved on the prices and other conditions of controlled transactions ... Read more

The need to consider the use of intangibles by a party to a controlled transaction involving a sale of goods can be illustrated as follows. Assume that a car manufacturer uses valuable proprietary patents to manufacture the cars that it then sells to associated distributors. Assume that the patents significantly contribute to the value of the cars. The patents and the value they contribute should be identified and taken into account in the comparability analysis of the transaction consisting in the sales of cars by the car manufacturer to its associated distributors, in selecting the most appropriate transfer pricing method for the transactions, and in selecting the tested party. The associated distributors purchasing the cars do not, however, acquire any right in the manufacturer’s patents. In such a case, the patents are used in the manufacturing and may affect the value of the cars, but the patents themselves are not transferred ... Read more

A Czech pharmaceutical distributor was found to have conducted transactions with its US parent, Arrow International Inc., on terms inconsistent with arm's length principles during the 2005/2006 tax year. The tax authority disallowed the company's investment tax relief and issued additional assessments. The Supreme Administrative Court upheld the Regional Court's decision in favour of the tax authority, confirming the burden of proof had not been discharged by the taxpayer ... Read more

Fulford India imported active pharmaceutical ingredients from related group companies and applied TNMM to price those transactions. The Indian tax authority substituted the CUP method following audits for FY 2006-07 and 2007-08. The Income Tax Appellate Tribunal found that Fulford's secondary manufacturing activities, converting APIs into formulations, had not been properly considered, and remanded the case to the tax administration for a revised assessment in 2011 ... Read more