The Venezuelan tax authority claimed that Brightstar‘s profitability was not arm’s length, based on the profitability of comparable companies, cf. the Transactional Net Margin Method.
The tax court ruled that Brightstar de Venezuela had correctly applied the TNMM and the tax auditors made a mistake when they calculated Brightstar’s profitability. The tax authorities should have analyzed each individual transaction and taken into account the segmented financial information of the audited transaction. The tax court annulled the adjustment due to non-compliance with the 2010 OECD TP Guidelines.