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Transfer Pricing News for the Week of May 10, 2021

10th May 2021

Tetra Pak Loses in Denmark Supreme Court Transfer Pricing Case  

I scream, you scream, we all screamfor transfer pricing. Tetra Pak, a Danish producer and seller of ice cream production plants, lost its legal battle over estimated taxable income for fiscal year 2005 to 2009. Here’s the scoop. Tetra Pak Processing Systems A/S conducted intra-group transactions with Tetra Pak Group’s sales companies, a move that the Danish Tax Authority did not deem arm’s length. The authority performed a discretionary estimated assessment, based on the company’s inadequate transfer pricing documentation and sustained losses. Their findings were the tax equivalent of a brain freeze, increasing Tetra’s income by approximately 57.5 million U.S. dollars. Tetra Pak fought back, all the way to the Danish Supreme Court. The Supreme Court ruled that the transfer pricing documentation was, in fact, insufficient and lacked a comparability analysis, which justified the tax bump. The Danish Tax Authorities have been making headway on landmark rulings—Microsoft, Adecco, and now, Tetra Pak. A little advice to MNEs—keep your documentation up-to-date or risk a legal match that’s less vanilla and more rocky road.   

Spain Issues Guidance on Value Range  

Spain is throwing taxpayers a lifeline. The Spanish Tax Authorities latest guidance outlines how to determine a value range for an arm’s length price. Pulling from the OECD’s Transfer Pricing guidelines and the EU’s Joint Transfer Pricing Forum, the guidance covers areas like testing the value of controlled transactions, when to employ statistical tools, and ways to handle ranges with a wide dispersion. It also recommends regular assessment of comparability, to confirm that the range is still applicable. With multinational scrutiny on the up and up in Spain, taxpayers will be happy for a little hand holding.   

UN Updates Transfer Pricing Manual for Developing Countries  

Your phone and wardrobe are constantly seeing updates. Turns out transfer pricing isn’t far behind. The UN released the latest version of its transfer pricing manual for developing countries, which replaces the 2017 edition. So, what are the new nuggets of content? We’ll save you from flipping through 600-plus pages. The updates to the manual cover intragroup financial transactions, country practices, and centralized procurement functions. It also helps with navigating profit splits and resolving comparability issues. The UN wants to help provide as much clarity as possible to developing countries, and an updated guidance is a step in the right direction.