In 2013, Philips Uruguay S.A. agreed to sell of its business division related to the marketing of audio and video products to another entity within the group, Woox Innovations Sucursal Uruguay. The related parties had agreed on a price of USD 2,546,409.
Philips Uruguay, had not include the transaction in its transfer pricing documentation as – according to the company – the transfer pricing regime in Uruguay was only applicable to transactions involving different jurisdictions (transactions with foreign entities) – unless the domestic transactions were between local entities taxed under different local tax regimes.
The tax administration disagreed that purely domestic transactions were not subject for to transfer pricing rules in Uruguay. They also disagreed with the arm’s length nature of the agreed price of USD 2.546.409 and instead estimated an arm’s length value of USD 5,063,294. Consequently, an assessment was issued resulting in an additional tax of USD 630.000.
Philips Uruguay disagreed with the assessment and brought the case to court.
Judgement of the Court
The court agreed that transfer pricing rules in Uruguay are also applicable to purely domestic transactions. However, the tax assessment was annulled by the court, as the price agreed between the parties was considered to have been at arm’s length.Uruguay vs Philips July 2019 Sent_TCA_456_2019