Following an audit, the Spanish tax authorities issued a notice of assessment where the profit of Electrolux España had been adjusted resulting in additional taxable income. The related party transactions resulting in the adjustment were Manufacturing costs under a manufacturing contract Profit margin under a distribution contract Deductibility for restructuring costs Pricing of a warehouse rental agreement. A complaint was filed by Electrolux España with the TEAC which upheld the part of the assessment referring to related-party transactions. An appeal was then filed by the company with the National Court. Judgment of the Court The Court ruled parcially in favor of the tax authorities and parcially in favour of Electrolux España. Excerpts “The Inspectorate therefore concludes that “where a group, as in this case, qualifies its contract manufacturer as a low-risk manufacturer and, in turn, this low-risk manufacturer sizes its plant with appropriate investments to serve only its related principal, it cannot be assumed that the losses arising from the ...
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