Transfer pricing dispute resolved through settlement before the Western High Court
The Ministry of Taxation agreed to reduce the taxable income by an amount proposed by the taxpayer as part of a negotiated settlement.
The case is now closed, and the company will receive a considerable refund of tax and interest.
The case was one of the more extensive transfer pricing disputes in Denmark, raising difficult questions about valuation methods and the tax treatment of intercompany transactions in connection with a business restructuring.
Plesner has advised in a long-running transfer pricing dispute against the Ministry of Taxation that has been successfully resolved through settlement shortly before the scheduled hearing before the Western High Court.
The case concerned a Danish company that, as part of a global restructuring in 2003, transitioned from being a full-scale manufacturer and distributor to acting as a toll manufacturer for a related group company. In a 2009 decision, the Danish Tax Agency found that the restructuring involved a transfer of intangible assets from the Danish company to its Swiss affiliate without arm’s length compensation and increased the company’s taxable income by DKK 384 million.
In 2015, the National Tax Tribunal reduced the assessment to DKK 250 million. The company brought the case before the courts, seeking to have the remaining adjustment further reduced or set aside entirely.
The tax authorities relied on a discretionary valuation approach, which the company challenged on several grounds. The main points of disagreement concerned the choice of valuation method, the interpretation of the management projections prepared at the time, and how to adjust for the transfer pricing principles behind those projections. The case also involved secondary issues relating to the valuation of inventory that was transferred as part of the restructuring.
After nearly ten years of litigation, the parties settled the case. The Ministry of Taxation agreed to reduce the taxable income by an amount proposed by the taxpayer as part of a negotiated settlement. The case is now closed, and the company will receive a considerable refund of tax and interest.
The case was one of the more extensive transfer pricing disputes in Denmark, raising difficult questions about valuation methods and the tax treatment of intercompany transactions in connection with a business restructuring.
The litigation was led by Søren Lehmann Nielsen, assisted by Rie Paving Mortensen, Kristian Thaulov, and Mads Okkels Sørensen.