Tag: Net Profit
Difference between receipts from business transactions and deductible business expenses, subject to any adjustments for tax purposes.
/ Arm's length principle, Benchmark study, Choice of tested party, Comparability factors, Comparables search, Decision in favor of tax authority, Delineation - Substance over Form, Greece, Gross Margin, Interquartile range, Interquartile range and median, Limited Risk Distributors (LRD), Losses that continue indefinitely, Median, Net Profit , Netherlands, Pharma, Tax Court, Transactional net margin method (TNMM), Transfer Pricing Methods, Use of range
“G Pharma Ltd” is a distributor of generic and specialised pharmaceutical products purchased exclusively from affiliated suppliers. It has no significant intangible assets nor does it assume any significant risks. However for 17 consecutive years it has had losses. Following an audit, the tax authorities issued an assessment, where the income of G Pharma Ltd was determined by application of the Transactional Net Margin Method (TNMM). According to the tax authorities a limited risk distributor such as G Pharma Ltd would be expected to be compensated with a small, guaranteed, positive profitability. G Pharma Ltd disagreed with the assessment and filed an appeal. Judgement of the Court The court dismissed the appeal of G Pharma Ltd and upheld the assessment issued by the tax authorities. Excerpts “First, the reasons for the rejection of the final comparable sample of two companies were set out in detail and then the reasons for using the net profit margin as an appropriate indicator of ... Read more