Shell Brasil Petróleo Ltda. charters oil rigs from its foreign affiliate and had used the CUP method to determine the price of these controlled transactions. It had compared the daily charter rates of its controlled transactions with the charter rates agreed between unrelated parties. On that basis it concluded that the prices charged in the controlled transactions were lower than the benchmark prices and therefore no adjustments were made to the pricing of the transactions. The tax authorities found that Shell’s pricing of the controlled transactions did not adequately reflect significant economic factors such as capital intensity. An assessment of additional taxable income was issued where the tax authorities had applied the Return on Average Capital Employed (ROACE) ratio to determine the pricing of the transactions. A complaint was filed by Shell with the Administrative Council of Tax Appeals – CARF Decision CARF dismissed the appeal and decided in favor of the tax authorities. According to the decision, Shell’s analysis ... Read more

In the Saipem case the Norwegian tax authorities found that the price paid by a related party for an oil rig had not been at arm’s length and issued an assessment. The majority of judges in the Court of Appeal found that the tax assessment was valid. The tax authorities had made sound and well-reasoned assessments and concluded that the price was outside the arm’s length range. According to the decision courts may show reluctance in testing discretionary assessments, thus giving the authorities a reasonable room for pricing transactions where the value is highly uncertain. An appeal of the case to the Supreme Court was not allowed (HR-2019-2428-U). Click here for translation ... Read more