Tag: Interquartile range

Denmark vs Pharma Distributor A A/S, March 2020, National Court, Case No SKM2020.105.OLR

Denmark vs Pharma Distributor A A/S, March 2020, National Court, Case No SKM2020.105.OLR

Results in a Danish company engaged in distribution of pharmaceuticals were significantly below the arm’s length range of net profit according to the benchmark study, but by disregarding annual goodwill amortization of DKK 57.1 million, the results were within the arm’s length range. The goodwill being amortized in Pharma Distributor A A/S had been determined under a prior acquisition of the company, and later – due to a merger with the acquiring danish company – booked in Pharma Distributor A A/S. The main question in the case was whether Pharma Distributor A A/S were entitled to disregard the goodwill amortization in the comparability analysis. The national tax court had ruled in favor of the company, but the national court reached the opposite result. Thus, the National Court found that the goodwill in question had to be regarded as an operating asset, and therefore the depreciation had to be regarded as operating expenses when calculating the net profit (EBIT margin). In ... Continue to full case
Portugal vs A S.A., October 2019, Tribunal Arbitral Coletivo, Case No 511/2018-T

Portugal vs A S.A., October 2019, Tribunal Arbitral Coletivo, Case No 511/2018-T

Company A is a Portuguese company in Group G (with an Indian parent) engaged in the production and sale of footwear and fashion accessories. Company C and Company D are also subsidiaries of the Group. Company A sold raw materials and goods to Company C and Company D, but also to unrelated parties. Company A had determined the pricing of the controlled transactions using the TNMM. External comparables were found using a commercial database. The Portuguese tax authority instead applied the TNMM using exclusively internal comparables, and on that basis it was concluded that the pricing of the controlled transactions had not been at arm’s length. The Tribunal found that the method applied by the tax authority was the most appropriate method for pricing the controlled transactions. Part 1 – Click here for translation Part 2 – Click here for translation P511_2018-T - 2019-10-10 - JURISPRUDENCIA ... Continue to full case
Poland vs Cans Corp, September 2019, Provincial Administrative Court i Szczecin, Case no SA/Sz155/19

Poland vs Cans Corp, September 2019, Provincial Administrative Court i Szczecin, Case no SA/Sz155/19

At issue in this case was the remuneration of a Polish manufacturing subsidiary in an international group dealing in the production and sale of metal packaging for food products, including beverage cans, food cans, household cans and metal closures. The tax authorities had issued an tax assessment for FY 2009 – 2012 based on a benchmark study. Decision of the Administrative Court The Court upheld the decision of the Tax and Revenue Office concerning income for the tax year from 01/01/2012 to 31/12/2012. In 2012, the Polish manufacturing site operated by producing lids for jars. In the course of the audit proceedings against the Party regarding corporate income tax for 2012, the first instance authority determined – based on a comparative analysis of the financial results of similar independent manufactures operating in the packaging industry on the market in Central and Eastern Europe, that this market showed an upward trend and in none of the years 2009-2012 this industry recorded ... Continue to full case
Sweden vs Absolut Company AB, June 2019, Supreme Administrative Court, Case no 1913-18

Sweden vs Absolut Company AB, June 2019, Supreme Administrative Court, Case no 1913-18

The Absolut Company AB had been issued an assessment of additional taxable income of SEK 247 mio. The assessment was based on the position that (1) The Absolut Company AB had been selling below the arm’s length price to an US group company – The Absolut Spirit Company Inc. (ASCI), and (2) that acquired distribution services from ASCI that had been priced above the arm’s length price. In 2018 the Swedish Administrative Court of Appeal ruled in favor of the tax administration. The Swedish Supreme Administrative Court has now ruled in favor of The Absolute Company AB. According to the Supreme Administrative Court the Swedish Tax Agency did not fulfill the burden of proof. The Supreme Administrative Court further states that the full range of results in the benchmark study could be applied and that a multiple year analysis of the tested party data can be used to support an arm’s length result. Click here for translation Sweden vs Absolut AB 2019 ... Continue to full case
Spain vs Ikea, March 2019, Audiencia Nacional (TEAC), Case No SAN 1072/2019

Spain vs Ikea, March 2019, Audiencia Nacional (TEAC), Case No SAN 1072/2019

The tax administration had issued an adjustment to the taxable profit of IKEA’s subsidiary in Spain considering that taxable profit in years 2007, 2008, and 2009 had not been determined in accordance with the arm’s length principle. In 2007 taxable profits had been below the interquartile range and in 2008 and 2009 taxable profits had been within the interquartile range but below the median. In all years taxable profits had been adjusted to the median found in the benchmark study. With respect to 2007 where the profit had been outside the interquartile range, the court held that profits should be adjusted to the lower quartile instead of the median, as argued by the tax administration. The tax administration had not demonstrated comparability defect in the comparability study provided by the taxpayer that justified using the median in the assessment of the arm’s length profit. For 2008 and 2009 where the taxable profit had been within the interquartile range – but ... Continue to full case
Italy vs BI S.r.l, November 2018, Tax Tribunal of Milano, Case no. 5445/3/2018

Italy vs BI S.r.l, November 2018, Tax Tribunal of Milano, Case no. 5445/3/2018

The Italian tax authorities had issued an assessment against a local distribution company of a multinational group, where the transfer pricing analysis conducted by the taxpayer had been disregarded. The tax authorities, carried out a new benchmark analysis based on the transactional net margin method (“TNMM”) and adjusted the company’s profitability to the median. The Tax Court cancelled the assessment, noting that the profitability range calculated by the tax authorities “goes, for the year 2013, from a minimum value of 1.40% to a maximum of 18.28%. The local distribution company obtained a 8.38%. Since the last percentage falls between the minimum and the maximum, for this judge the provisions of the aforementioned ministerial decree have to be applied (i.e. Ministerial Decree 14 May 2018)“. Click here for translation Commissione Tributaria Provinciale Lombardia Milano ... Continue to full case
Sweden vs. Absolut Company AB, Jan 2018, Administrative Court, No. 1610-16

Sweden vs. Absolut Company AB, Jan 2018, Administrative Court, No. 1610-16

In 2016 the Swedish Tax Tribunal ruled against the tax administration in the case of The Absolut (vodka) Company AB. The Administrative Court of Appeal has now overturned the Tribunal’s ruling and consequently SEK 247 mio. are now added to the taxable income of The Absolut Company AB. The Swedish tax administration found that The Absolut Company AB sold Absolut Vodka below the arm’s length price to a group company – The Absolut Spirit Company Inc. (ASCI). Furthermore, the swedish company acquired distribution services from ASCI at a price above the arm’s length price. The Court adresses: – timing of data and information in a Benchmarking search – use of interquartile range or full range – use of multible years data – the issue of hindsight Click here for translation Sweden vs The Absolute Company, Jan 2018, Administrative Court of Appeal, No 1610-16 ... Continue to full case
Korea vs Pharma Equipment Corp, September 2009, Corean Court, Case No 2008서1588

Korea vs Pharma Equipment Corp, September 2009, Corean Court, Case No 2008서1588

The Korean company was active as a domestic wholesaler of hospitals and pharmaceutical equipment imported acquired from foreign related parties. The taxation authorities have calculated the normal price by applying the TNM method for controlled transactions between the Korean company and it’s foreign related parties. In years where profits in the company was below the interquartile range the tax authorities issued an adjustment. But in years where profits was above the range no downward adjustment was made. The company filed a tax appeal claiming that income in year where profits had been to high should also be adjusted. The Judgement of the Court “Law No. 4 No. 1 on international tax adjustments” tax authorities deal is one of the parties in the international trade foreign related parties the transaction price if you do not meet or exceed the normal price, the residents based on the normal price The taxation authority can determine or adjust the tax base and tax amount ... Continue to full case
Germany vs Clothing Distribution Gmbh, October 2001, BFH Urt. 17.10.2001, IR 103/00

Germany vs Clothing Distribution Gmbh, October 2001, BFH Urt. 17.10.2001, IR 103/00

A German GmbH distributed clothing for its Italian parent. The German tax authorities issued a tax assessment based on hidden profit distribution from the German GmbH in favor of its Italien parent as a result of excessive purchase prices, which led to high and continuous losses in Germany.  The tax authorities determined the arm’s length price based on purchase prices, which the German GmbH had paid to external suppliers. However, these purchases accounted for only 5% of the turnover. The German Tax Court affirmed in substance a vGA (hidden profit distribution) as the tax authorities had provided no proff of deviation from arm’s length prices. If a hidden profit distribution is to be accepted, the profit shall be increased by the difference between the actually agreed price and the price agreed by independent contractual parties under similar circumstances – the arm’s length price. Where a range of arm’s length prices is produced, there are no legal basis for adjustment to the ... Continue to full case