This case concerns allocation of profits resulting from centralizing procurement functions within a group. The tax authorities took the position that the profit claimed by a centralized purchasing office was not aligned with the functions performed and the risks assumed by the office. According to the tax authorities profits derived from the realized discounts should be distributed to the members of the group (including a Dutch member) in proportion to their contribution of purchasing volume. Judgement of the Court The Supreme Court ruled in favor of the tax authorities. Profits in excess of the costs of the centralized purchase office with a markup of 5%, should at arm’s length be distributed to the members of the group in proportion to their contribution of purchasing volume. Excerpts “5.14. Notwithstanding the fact that [A-2 NV]’s profit was not so much caused by its own efforts but by the group’s policy of concentrating the price negotiations in [A-2 NV], and the extremely limited ... Read more