Tag: Resale price method

The resale price method is a transfer pricing method based on the price at which a product that has been purchased from an associated enterprise is resold to an independent enterprise. The resale price is reduced by the resale price margin. What is
left after subtracting the resale price margin can be regarded, after adjustment for other costs associated with the purchase of the product (e.g. custom duties), as an arm’s length price of the original transfer of property between the associated enterprises.

Finland vs A Group, December 2018, Supreme Administrative Court, Case No. KHO:2018:173

Finland vs A Group, December 2018, Supreme Administrative Court, Case No. KHO:2018:173

During fiscal years 2006–2008, A-Group had been manufacturing and selling products in the construction industry – insulation and other building components. License fees received by the parent company A OY from the manufacturing companies had been determined by application of the CUP method. The remuneration of the sales companies in the group had been determined by application of the resale price method. The Finnish tax administration, tax tribunal and administrative court all found that the comparable license agreements chosen with regard to determining the intercompany license fees had such differences regarding products, contract terms and market areas that they were incomparable. With regard to the sale of the finished products, they found that the resale price method had not been applied on a sufficiently reliable basis. By reference to the 2010 version of the OECD’s Transfer Pricing Guidelines, they considered the best method for determining the arm’s length remuneration of the group companies was the residual profit split method. The ... Continue to full case
Spain vs. Zeraim Iberica SA, June 2018, Audiencia Nacional, Case No. ES:AN:2018:2856

Spain vs. Zeraim Iberica SA, June 2018, Audiencia Nacional, Case No. ES:AN:2018:2856

ZERAIM IBERICA SA, a Spanish subsidiary in the Swiss Syngenta Group (that produces seeds and agrochemicals), had first been issued a tax assessment relating to fiscal years 2006 and 2007 and later another assessment for FY 2008 and 2009 related to the arm’s length price of seeds acquired from Zeraim Gedera (Israel) and thus the profitability of the distribution activities in Spain. The company held that new evidence – an advance pricing agreement (APA) between France and Switzerland – demonstrated that the comparability analysis carried out by the Spanish tax authorities suffered from significant deficiencies and resulted in at totally irrational result, intending to allocate a net operating result or net margin of 32.79% in fiscal year 2008 and 30.81% in 2009 to ZERAIM IBERICA SA when the profitability of distribution companies in the sector had average net margins of 1.59%. The tax authorities on there side argued that the best method for pricing the transactions was the Resale Price ... Continue to full case
Brazil vs Eli Lilly, April 2018, CARF Case No 1302-002-725F

Brazil vs Eli Lilly, April 2018, CARF Case No 1302-002-725F

This case concerns imports from related companies and use of the RPM method. Click here for translation Brazil vs Eli Lilly 11 april 2018 CARF Case No 1302-002-725F ... Continue to full case
Japan vs Adobe Systems Co., October 2008, Tokyo High Court

Japan vs Adobe Systems Co., October 2008, Tokyo High Court

Adobe Systems Co., a Japanese subsidiary of Adobe Systems Inc., received remuneration from Dutch and Irish group companies for promotion and marketing of Adobe software sold in Japan The remuneration of Adobe Systems Co. was determined as general administrative expenses plus 1.5% of net sales in Japan. A transfer pricing assessment was issued by the Japanese tax authorities where transfer prices were instead based profit margins derived in comparable transactions. Adobe Systems filed an appeal seeking revokal of the assessment. Tokyo High Court held that the tax assessment should be revoked. The burden of proof in relation to the legitimacy of the transfer pricing method applied was on the tax administration. The transfer pricing method used by the tax authority was not consistent with the resale price method. The method applied by the tax authorities “…cannot be said to be “a method equivalent to the resale price standard method” prescribed in Article 66-4, Paragraph 2, Item 2, b of the ... Continue to full case
Korea vs MedImpo Corp, August 2004, Tax Tribunal, Case No 심사법인 2003-0076

Korea vs MedImpo Corp, August 2004, Tax Tribunal, Case No 심사법인 2003-0076

The Korean company (hereinafter ‘MedImpo Corp’) imported medicines from foreign related parties and sold them locally. The tax authorities issued an assessment based on transfer prices between two unrelated comparable companies and then applied the resale price method to calculate the “normal price” on the imported medicines. MedImpo Corp argued that the selection of a comparable company by the taxation authority was unlawful. They held that the selected transactions between local companies were not comparable because MedImpo Corp purchased and sold goods from overseas related parties. The Korean Tax Tribunal ruled in favor of the tax authorities. “Even if the price is applied in transactions with foreign related parties, if the transaction is conducted at a price that is considered to be applied or applied in a normal transaction with a person who is not a related party, the price may be the normal price (meaning: In the case of calculating the normal price, the normal price range should be ... Continue to full case
Germany vs Clothing Distribution Gmbh, October 2001, BFH Urt. 17.10.2001, IR 103/00

Germany vs Clothing Distribution Gmbh, October 2001, BFH Urt. 17.10.2001, IR 103/00

A German GmbH distributed clothing for its Italian parent. The German tax authorities issued a tax assessment based on hidden profit distribution from the German GmbH in favor of its Italien parent as a result of excessive purchase prices, which led to high and continuous losses in Germany.  The tax authorities determined the arm’s length price based on purchase prices, which the German GmbH had paid to external suppliers. However, these purchases accounted for only 5% of the turnover. The German Tax Court affirmed in substance a vGA (hidden profit distribution) as the tax authorities had provided no proff of deviation from arm’s length prices. If a hidden profit distribution is to be accepted, the profit shall be increased by the difference between the actually agreed price and the price agreed by independent contractual parties under similar circumstances – the arm’s length price. Where a range of arm’s length prices is produced, there are no legal basis for adjustment to the ... Continue to full case