Venezuela vs. Brightstar, 23. Feb 2017, Tax Court of Caracas

Posted on | By Courts of Venezuela
Category: Transfer Pricing Methods | Tag: ,
« | »

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.

Related Guidelines

TPG2022 Chapter III paragraph 3.37The transactional focus of transfer pricing methods and the question of a possible aggregation of the taxpayer’s controlled transactions are discussed at paragraphs 3.9-3.12. A different question is whether non- transactional third party data can provide reliable comparables for a taxpayer’s controlled transactions (or set of transactions aggregated consistently with...
TPG2022 Chapter IV paragraph 4.4Tax compliance practices are developed and implemented in each member country according to its own domestic legislation and administrative procedures. Many domestic tax compliance practices have three main elements: a) to reduce opportunities for non-compliance (e.g. through withholding taxes and information reporting); b) to provide positive assistance for compliance (e.g....
TPG2022 Chapter IV paragraph 4.18Penalties are most often directed toward providing disincentives for non-compliance, where the compliance at issue may relate to procedural requirements such as providing necessary information or filing returns, or to the substantive determination of tax liability. Penalties are generally designed to make tax underpayments and other types of non-compliance more...
TPG2022 Chapter V paragraph 5.14In situations where a proper transfer pricing risk assessment suggests that a thorough transfer pricing audit is warranted with regard to one or more issues, it is clearly the case that the tax administration must have the ability to obtain, within a reasonable period, all of the relevant documents and...
TPG2022 Chapter V paragraph 5.40Many countries have adopted documentation-related penalties to ensure efficient operation of transfer pricing documentation requirements. They are designed to make non-compliance more costly than compliance. Penalty regimes are governed by the laws of each individual country. Country practices with regard to transfer pricing documentation-related penalties vary widely. The existence of...
OECD COVID-19 TPG paragraph 11In principle, any form of publicly available information regarding the effect of COVID-19 on the business, industry and controlled transaction may be relevant in ascertaining the arm’s length nature of an enterprise’s transfer pricing policy implemented for FY 2020. The following sources of information may support that determination through the...
TPG2022 Chapter VII paragraph 7.49The following bullet points provide examples of services that would likely meet the definition of low value-adding services provided in paragraph 7.45: accounting and auditing, for example gathering and reviewing information for use in financial statements, maintenance of accounting records, preparation of financial statements, preparation or assistance in operational and...
TPG2022 Chapter II paragraph 2.78Assume, for example, that a taxpayer sells top quality audio players to an associated enterprise, and the only profit information available on comparable business activities is on generic medium quality audio player sales. Assume that the top quality audio player market is growing in its sales, has a high entry...
TPG2022 Chapter IV paragraph 4.26Because cross-border transfer pricing issues implicate the tax base of two jurisdictions, an overly harsh penalty system in one jurisdiction may give taxpayers an incentive to overstate taxable income in that jurisdiction contrary to Article 9. If this happens, the penalty system fails in its primary objective to promote compliance...
OECD COVID-19 TPG paragraph 30One potential solution to the uncertainty caused by the COVID-19 pandemic would be to allow for the inclusion of price adjustment mechanisms in controlled transactions. This may provide for flexibility while maintaining an arm’s length outcome. In particular, this approach to the extent permissible by domestic law would allow the...