Delta Beverages LTD had been issued a tax assessment where various fees for service, technology license of trademarks, technology and know-how had been disallowed by the tax authorities (Zimra) of Zimbabwe.
Among the issues contented by the tax authorities were technical service fees calculated as 1.5 % of turnover.
“The sole witness confirmed the advice proffered to the holding company’s board of directors in the minutes of 17 May 2002 that such an approach was common place across the world. This was confirmed by the approvals granted by exchange control authority to these charges. It was further confirmed by the very detailed 19 page Internal Comparable Analysis Report dated 5 October 2010 conducted by a reputable international firm of chartered accountants, which was commissioned by the Dutch Company to assess internal compliance with the arm’s length principles in its transfer pricing policy for trademark royalties of its cross border brands. The commissioned firm looked at 20 comparative agreements, which were submitted to the Commissioner and summarised in ther 11 documents, and confirmed that the percentage of turnover approach was in vogue even amongst unrelated parties in the beverages industry worldwide.”
On most issues – including the above – the court ruled in favor of Delta Ltd.