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

Facebook entered a cost-sharing arrangement in 2009, transferring platform and marketing intangibles to its Irish affiliate and valuing them at $6.3 billion. The IRS applied the income method and assessed a $19.9 billion value. The US Tax Court ruled mostly in favour of the IRS, upholding the income method and rejecting challenges to the 2009 cost-sharing regulations, but materially reduced the IRS valuation amount ... Read more

A Costa Rican company providing maquila and marketing services to a tax-exempt related party, Coopeliberia, was audited for booking losses while shifting profits to the exempt entity. The tax authority imposed adjustments, which the Supreme Court upheld in 2024, affirming the administration's right to intervene in abusive pricing arrangements. The Court nonetheless annulled the lower court judgment and remanded the case due to procedural deficiencies in prior reasoning ... Read more

A German pharmaceutical distributor marketed its foreign parent's products, inadvertently boosting parallel importers' sales under German healthcare rules without receiving compensation. The tax authority treated this as a hidden profit distribution. After the Nuremberg Finance Court annulled the assessment, Germany's Federal Fiscal Court reversed that decision in 2024, holding that uncompensated expense savings for the parent group constituted a hidden profit distribution ... Read more

Sabic India, an intra-group marketing services provider, used TNMM with a Berry ratio and cost-based profit level indicators to price controlled transactions. The tax authority rejected the method without reasons and applied an alternative other method. The Income Tax Appellate Tribunal overturned the assessment, and the Delhi High Court upheld that decision in 2024, finding the TPO had failed to justify rejecting TNMM used in prior years ... Read more

A Czech subsidiary of Eli Lilly deducted costs for marketing services provided to a Swiss group company, Eli Lilly Export S.A. The Czech tax authority disallowed the deduction, finding no direct link between the costs and taxable income. The Supreme Administrative Court dismissed the taxpayer's appeal in 2024, ruling that a cost-plus pricing model alone cannot establish the required direct relationship between expenses and income ... Read more

A Colombian bottling company filed its 2011 transfer pricing return using TNMM with return on total costs as the profit level indicator. Tax authorities challenged the methodology, substituting return on capital employed instead. The Administrative Court ruled for the taxpayer, and in April 2024 the Council of State upheld that decision, confirming that the taxpayer's chosen profit level indicator correctly reflected the arm's length nature of its related-party transactions ... Read more

Walmart Chile S.A. deducted costs for inter-group management, marketing, and advertising services, along with interest on an intra-group loan, in its 2014 and 2015 tax returns. The Chilean tax authority disallowed these deductions following an audit. The Tax Court largely sided with the authority, and the Court of Appeal upheld that decision in March 2024, confirming the disallowances due to insufficient documentation ... 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 Polish tobacco wholesaler within the E group was denied VAT input tax deductions on invoices for marketing services, data processing and re-invoiced purchases from related entities. The tax authority found the services were not genuinely performed for the company's benefit. In May 2023, the Polish Administrative Court dismissed the taxpayer's appeal, confirming the assessment in full in favour of the tax authority ... Read more

A Czech company deducted costs for advertising and promotional services purchased through two intermediary entities. The tax authority concluded the arrangements were structured to reduce the tax base and applied the CUP method using direct contract prices as references to establish arm's length pricing. The Regional Court ruled in favour of the tax authority in April 2023, upholding the adjustments to the taxpayer's tax base ... Read more

Dolce & Gabbana S.R.L., a trademark licensee, sub-licensed rights to its subsidiary DG Industria and engaged US affiliate DG Usa for marketing services under a cost-plus arrangement. Italy's tax authority challenged the deductibility and arm's length nature of these intra-group charges. The Supreme Court ruled mostly in favour of the tax authority in November 2022, remanding the case for re-examination on key transfer pricing and benefit-test grounds ... 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 Czech company was assessed additional tax after authorities found its payments to a related supplier for advertising space exceeded arm's length prices. The Regional Court dismissed the company's appeal, and the Supreme Administrative Court upheld that ruling in November 2022, confirming the CUP method applied by the tax authority and finding the taxpayer failed to justify the full advertising costs claimed ... Read more

(i) Facts. The year 1 facts are the same as in Example 3. In year 2, FP and USSub enter into a separate services agreement that obligates FP to perform incremental marketing activities, not specified in the year 1 license, by advertising AA trademarked athletic gear in selected international sporting events, such as the Olympics and the soccer World Cup. FP’s corporate advertising department develops and coordinates these special promotions. The separate services agreement obligates USSub to pay an amount to FP for the benefit to USSub that may reasonably be anticipated as the result of FP’s incremental activities. The separate services agreement is not a qualified cost sharing arrangement under § 1.482-7T. FP begins to perform the incremental activities in year 2 pursuant to the separate services agreement. (ii) Whether an allocation is warranted with respect to the incremental marketing activities performed by FP under the separate services agreement would be evaluated under § 1.482-9. Under the circumstances, it is reasonable to anticipate that FP’s ... Read more

(i) Facts. The year 1 facts are the same as in Example 3. In year 2, FP and USSub enter into a separate services agreement that obligates USSub to perform certain incremental marketing activities to promote AA trademark athletic gear in the United States, above and beyond the activities specified in the license agreement executed in year 1. In year 2, USSub begins to perform these incremental activities, pursuant to the separate services agreement with FP. (ii) Whether an allocation is warranted with respect to USSub’s incremental marketing activities covered by the separate services agreement would be evaluated under §§ 1.482-1 and 1.482-9, including a comparison of the compensation provided for the services with the results obtained under a method pursuant to § 1.482-9, selected and applied in accordance with the best method rule of § 1.482-1(c). (iii) Whether an allocation is warranted with respect to the royalty under the license agreement is determined under § 1.482-1, and this section through § 1.482-6. The comparability analysis would include consideration ... Read more

British Tobacco Centroamérica S.A. imported goods from a related foreign company under a sales contract that also covered consultancy services, including marketing studies and sales campaigns. Costa Rica's tax authority identified discrepancies between declared customs values and invoice values, then assessed additional withholding tax on source income. The Costa Rica Supreme Court dismissed the company's appeal in 2022 and upheld the withholding tax assessment in full ... Read more

Kellogg India Private Limited distributed Pringles products imported from its Singapore affiliate, which acted as a cost-plus intermediary. The company selected the Singapore entity as the tested party for benchmarking. Indian tax authorities rejected this approach, instead selecting Kellogg India as the tested party. The Mumbai Income Tax Appellate Tribunal ruled in favour of the taxpayer in February 2022, upholding the foreign affiliate as the appropriate tested party ... Read more

A Spanish subsidiary of a multinational shopping centre group deducted fees for strategic management and marketing services provided by a related Portuguese entity. The Spanish tax authority disallowed both deductions, citing lack of contracts and classifying marketing costs as shareholder expenses. The National Court in 2022 upheld the disallowance of management fees due to insufficient documentation but ruled in favour of the taxpayer on the marketing services deduction ... Read more

A common situation where these principles must be applied arises when an enterprise associated with the legal owner of trademarks performs marketing or sales functions that benefit the legal owner of the trademark, for example through a marketing arrangement or through a distribution/marketing arrangement. In such cases, it is necessary to determine how the marketer or distributor should be compensated for its activities. One important issue is whether the marketer/distributor should be compensated only for providing promotion and distribution services, or whether the marketer/distributor should also be compensated for enhancing the value of the trademarks and other marketing intangibles by virtue of its functions performed, assets used, and risks assumed ... Read more

A Polish wholesale distributor was assessed additional tax after the tax authority found its 2.84% profit margin fell below a range derived from three comparable wholesalers. The Administrative Court dismissed the company's complaint, but Poland's Supreme Administrative Court annulled the decision in 2021, ordering reexamination on issues including aggregation of marketing services, choice of transfer pricing method, benchmarking standards, and the use of the interquartile range with limited comparables ... Read more

A Czech non-profit had its marketing expense deductions adjusted by tax authorities who deemed the parties otherwise connected under Czech arm's length provisions. The Supreme Administrative Court ruled in favour of the taxpayer in 2021, holding that the tax authority must first establish and prove the existence of a related-party relationship before it can proceed to any arm's length price adjustment ... Read more

LCN Group deducted costs for marketing services from related parties at prices 23 to 56 times higher than the underlying advertising cost. Czech tax authorities challenged the arm's length nature of these payments. The Regional Court annulled the assessment, finding the comparability analysis insufficient. In 2021, the Supreme Administrative Court reversed that decision and remanded the case to the Regional Court for further examination ... Read more

A German pharmaceutical distributor promoted its foreign parent's products, inadvertently boosting parallel importers under mandatory German pharmacy rules without receiving extra compensation. The tax authority treated this uncompensated benefit as a hidden profit distribution and increased taxable income. The Nuremberg Finance Court annulled the assessment in 2021, finding no evidence that an independent distributor would have earned a higher margin under comparable circumstances ... Read more

Sabic India Pvt Ltd provided marketing support services for the Sabic Group without holding title to inventories. The Indian tax authorities rejected TNMM in favour of the CUP method, issuing a transfer pricing adjustment. The Delhi Income Tax Appellate Tribunal set aside the assessment in 2021, finding that TNMM had been consistently accepted since 2009 and that authorities provided no valid justification for departing from it ... Read more

A Czech taxpayer challenged a tax authority assessment disallowing marketing expense deductions, arguing the authority failed to prove a related-party relationship existed. The Regional Court in Ostrava dismissed the appeal in 2021, confirming the parties were otherwise connected under Czech Income Tax Act arm's length provisions and upholding the additional income assessment against the taxpayer ... Read more

An Italian plastic pipes manufacturer deducted marketing costs incurred partly for its foreign subsidiaries without recharging them. The tax authorities assessed additional income, arguing the costs should have been recharged. The Court of First Instance sided with the taxpayer, and Italy's Supreme Court dismissed the tax authority's appeal in January 2021, confirming that the burden of proving deviation from normal market value rests with the tax authorities ... Read more

Alcopa N.V., the first European Hyundai distributor, contested the Belgian tax authority's reclassification of reimbursements from Hyundai Motor Company as abnormal or gratuitous benefits, which triggered denial of the DBI deduction under Section 207 ITC92. The Antwerp courts upheld the assessments for FY 2002 and 2003, finding no conflict with the EU Parent-Subsidiary Directive. The Belgian Supreme Court dismissed Alcopa's further appeal in September 2020 ... Read more

A Czech company deducted costs for marketing services provided by related parties, but tax authorities challenged the arm's length nature of the prices and issued an assessment. The Regional Court annulled the assessment in 2020, finding the tax authorities had insufficiently analysed the conditions of the controlled transactions, including the commercial strength and advertising capacity of the parties involved ... 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

A Czech taxpayer deducted advertising campaign expenses paid to related entities for tax years 2007–2009. The tax authority disallowed the deductions, finding the agreed prices differed from arm's length prices under Article 23(7)(b)(5) of the Income Tax Act. The Regional Court and the Supreme Administrative Court both upheld the adjustment in 2019, confirming that proof of active participation by all chain entities was not required to establish the taxpayer's involvement ... Read more

A Finnish holding company charged subsidiaries only cost-recovery fees for supply chain, marketing, and IT services with no profit markup. The Finnish Tax Administration applied a 7% markup using Amadeus database comparables. The Supreme Administrative Court upheld the authority's position in 2017, ruling that market-based pricing required a profit element above costs, though the exact markup calculation methodology remained disputed ... Read more

TCL Belgium provided marketing services through its French branch under a 2007 agreement with TCL Macao. French tax authorities challenged the arrangement as a transfer of profits under Article 57 of the French Tax Code. The Versailles Administrative Court of Appeal largely upheld the tax authority's position in 2016, confirming the use of TNMM with a multi-year median benchmark to determine arm's length remuneration for the French permanent establishment ... Read more

A Canadian aluminum manufacturer paid fees to its wholly-owned Barbados subsidiary for sales, marketing, and support services in 2000 and 2001. The CRA reassessed the taxable income, favouring the CUP method over the TNMM proposed by the taxpayer's expert. Canada's Federal Court of Appeal upheld the 2014 Tax Court decision, confirming that CRA had been largely correct in its transfer pricing reassessment ... Read more

A Czech company challenged the tax authority's arm's length pricing of advertising services. The Supreme Administrative Court upheld the authority's use of the comparable uncontrolled price method, finding that factors such as advertising space size, event type, and duration were properly considered when comparing controlled and uncontrolled transactions. JN Trans's appeal was dismissed in 2014 ... Read more

A Croatian company paid a related German party for consultant services and received payments from its US parent for software sales services. The tax authority found insufficient documentation and non-arm's length pricing, issuing additional CIT and VAT assessments. Both the Administrative Court and the High Administrative Court upheld the authority's position, confirming the taxpayer had failed to justify the pricing of its intra-group transactions ... Read more