Tag: Price reduced by withholding tax

Pricing adjustment mechanism where the gross arm’s length price is reduced to account for withholding tax borne by the payer. Disputed where tax authorities argue the reduction understates the true arm’s length return, particularly on interest and royalty payments between related parties.

Hungary vs "Lender" Kft, January 2021, Supreme Administrative Court, Case No. Kfv.I.35.251/2020/7

Hungary vs “Lender” Kft, January 2021, Supreme Administrative Court, Case No. Kfv.I.35.251/2020/7

/ Comparability Analysis, Financial Transactions, Transfer Pricing Methods, Withholding Tax (WHT), CDI rate, Comparability, Comparable data, Deposit rate, Deposit transaction, Expert witnesses, Interest rate, Intra-group loan, Loan, Not a bank, Other methods, Price reduced by withholding tax, Subordinated bonds, Use of other methods, Withholding tax
A Hungarian lender provided a loan to its Brazilian affiliate at CDI-linked rates, which the tax authority challenged as above arm's length. Using the CUP method with external comparables and a risk premium model, Lender Kft. argued the rates were market-consistent. Hungary's Supreme Administrative Court remanded the case for re-examination in 2021, finding the comparability analysis and use of expert evidence insufficient ... Read more
Hungary vs "Lender" Kft, February 2020, Budapest Administrative Court, Case No. 16.K.33.691/2019/18

Hungary vs “Lender” Kft, February 2020, Budapest Administrative Court, Case No. 16.K.33.691/2019/18

/ Comparability Analysis, Financial Transactions, Transfer Pricing Methods, Withholding Tax (WHT), CDI rate, Comparability, Comparable data, Deposit rate, Deposit transaction, Expert witnesses, Interest rate, Intra-group loan, Loan, Not a bank, Other methods, Price reduced by withholding tax, Subordinated bonds, Use of other methods, Withholding tax
A Hungarian lender entity charged interest on a loan to a foreign affiliate using a CDI-rate plus spread formula. The tax authority challenged whether the rates fell within arm's length ranges. The Budapest Administrative Court ruled in favour of the taxpayer in 2020, accepting the CUP method analysis and comparability evidence, including expert witness testimony and external risk premium modelling ... Read more
Denmark vs MAN Energy Solutions, September 2019, Supreme Court, Case No SKM2019.486.HR

Denmark vs MAN Energy Solutions, September 2019, Supreme Court, Case No SKM2019.486.HR

/ Royalty and License Payments, Services and Fees, Withholding Tax (WHT), Comparable Uncontrolled Price method (CUP), Price reduced by withholding tax, Royalty and license payments, Withholding tax
A Danish subsidiary owned intangibles licensed to third parties via its German parent. The group sought a royalty adjustment to account for withholding taxes on inter-company payments, but the Danish tax authority rejected the claim. The Supreme Court upheld this decision in 2019, finding no basis for adjustment since the agreed intra-group prices already matched prices paid by independent parties under the CUP method ... Read more