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Database of Transfer Pricing Case Laws

Vietnam vs DNTN NK, September 2017, High Court, Case No 247/2017/HC-PT

Posted on September 15, 2017 | By Courts of Vietnam | No comments

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DNTN NK sold rice husk to a household business owned by the owner’s daughter at a fixed price of 40 VND/kg, while the daughter’s retail prices and other local data showed market prices in the hundreds of VND/kg over the same years.

The tax authority concluded there were signs of mispricing from the enterprise to the related household business that paid tax on a presumptive basis, and used comparable local prices to re-determine the sales price and assess additional taxes and penalties.

Judgment

The appellate court upheld the tax authority’s use of comparable prices and the reassessment.

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Related Guidelines

TPG2022 Chapter II paragraph 2.17In considering whether controlled and uncontrolled transactions are comparable, regard should be had to the effect on price of broader business functions other than just product comparability (i.e. factors relevant to determining comparability under Chapter I). Where differences exist between the controlled and uncontrolled transactions or between the enterprises undertaking...

TPG2022 Chapter II paragraph 2.14The CUP method compares the price charged for property or services transferred in a controlled transaction to the price charged for property or services transferred in a comparable uncontrolled transaction in comparable circumstances. If there is any difference between the two prices, this may indicate that the conditions of the...

TPG2022 Chapter II paragraph 2.13This part provides a detailed description of traditional transaction methods that are used to apply the arm’s length principle. These methods are the comparable uncontrolled price method or CUP method, the resale price method, and the cost plus method....

TPG2022 Chapter II paragraph 2.3Traditional transaction methods are regarded as the most direct means of establishing whether conditions in the commercial and financial relations between associated enterprises are arm’s length. This is because any difference in the price of a controlled transaction from the price in a comparable uncontrolled transaction can normally be traced...

TPG2022 Chapter VI paragraph 6.147In some situations, intangibles acquired by an MNE group from independent enterprises are transferred to a member of the MNE group in a controlled transaction immediately following the acquisition. In such a case the price paid for the acquired intangibles will often (after any appropriate adjustments, including adjustments for acquired...

TPG2022 Chapter VI paragraph 6.146Where reliable comparable uncontrolled transactions can be identified, the CUP method can be applied to determine the arm’s length conditions for a transfer of intangibles or rights in intangibles. The general principles contained in paragraphs 2.14 to 2.26 apply when the CUP method is used in connection with transactions involving...

TPG2022 Chapter VI paragraph 6.145The transfer pricing methods most likely to prove useful in matters involving transfers of one or more intangibles are the CUP method and the transactional profit split method. Valuation techniques can be useful tools. Supplemental guidance on the transfer pricing methods most likely to be useful in connection with transfers...

TPG2022 Chapter VII paragraph 7.31The method to be used to determine arm’s length transfer pricing for intra-group services should be determined according to the guidelines in Chapters I, II, and III. Often, the application of these guidelines will lead to use of the CUP or a cost-based method (cost plus method or cost-based TNMM)...

TPG2022 Chapter X paragraph 10.187Consider the same fact pattern as described in Example 1, but in this case assume that under the guidance in Section D.2, comparable uncontrolled transactions can be identified showing that the arm’s length price of a comparable guarantee would be in the range of 1% to 1.5%....

TPG2022 Chapter X paragraph 10.95Whereas it is unlikely that an MNE group’s average interest rate paid on its external debt meets the comparability requirements to be considered as an internal CUP, it may be possible to identify potential comparable loans within the borrower’s or its MNE group’s financing with an independent lender as the...

Supplemental Guidance

Canada vs. Marzen Artistic Aluminum. January 2016A Canadian aluminum manufacturer paid fees to its wholly-owned Barbados subsidiary for sales, marketing, and support services in 2000 and 2001. The CRA reassessed the taxable income, favouring the CUP method over the TNMM proposed by the taxpayer's expert. Canada's Federal Court of Appeal upheld the 2014 Tax Court decision,...

Canada vs. GlaxoSmithKline Inc., October 2012, Supreme Court, Case No 2012 SCC 52GlaxoSmithKline Inc. purchased ranitidine, the active ingredient in Zantac, from a related party at prices the Canadian tax authority challenged as unreasonably high. The Supreme Court of Canada partially reversed the Tax Court's decision and affirmed the Federal Court of Appeal, holding that other related transactions must be considered when...

Italy vs SGL CARBON SPA, September 2013, Supreme Court 22010An Italian subsidiary paid interest on loans from its German parent at rates the tax authority deemed significantly above the German market average. After lower courts split on the issue, Italy's Supreme Court dismissed the taxpayer's appeal in 2013, affirming that the comparable uncontrolled price method should prioritise internal comparables,...

Italy vs. Solvay s.a., October 2013, Supreme Court, 24005Following an audit of Solvay Italia, Italian tax authorities adjusted prices charged on intra-group sales of soda ash and sodium bicarbonate to the Belgian parent, finding them over 44% below arm's length using the CUP method with internal comparables. Lower courts sided with the taxpayer, but Italy's Supreme Court reversed...

Italy vs. ILPEA SPA, July 2015, Supreme Court 15298An Italian company contested the tax authority's benchmark transactions used to assess its sales to a US subsidiary, arguing product and volume differences made comparisons invalid. Italy's Supreme Court ruled in 2015 that intra-group transactions must reflect normal value, defined as average arm's length prices for similar goods at the...

Italy vs SAME DEUTZ FAHR ITALIA s.p.a, July 2015, Supreme Court, no 15282An Italian company faced a tax authority challenge over the method used to determine normal value in transactions with related parties. The Supreme Court examined the application of the Comparable Uncontrolled Price method and the burden of proof in transfer pricing disputes, ruling mostly in favour of the taxpayer in...

France vs. PHARMATIQUE INDUSTRIE, July 1994, CAA, No 92PA01392A French pharmaceutical company claimed deductions for royalties paid for the use of trademarks and know-how. The French tax authorities challenged the payments using five comparable licence agreements in the same sector as CUP benchmarks. The Court of Appeal ruled in favour of the tax authority in 1994, finding the...

France vs. Sté Amycel France, 16 March 2016, CE, No 372372),A French company sold goods to both related-party distributors and unrelated end customers. The tax authority used the third-party sales as an internal comparable to challenge intra-group pricing. The French Council of State ruled in favour of the taxpayer in 2016, finding the comparison inappropriate because the contractual relationships differed...

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Vietnam vs DNTN NK, September 2017, High Court, Case No 247/2017/HC-PT

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