Background
On April 30, 2025, the Australian Administrative Tribunal (ART) ruled in favor of Alcoa of Australia Ltd. in a dispute with the Australian Taxation Office (ATO) related to transfer pricing. The dispute centered on sales of alumina to a refinery in Bahrain between 1993 and 2009, where the ATO alleged that Alcoa had not applied market prices in its transactions with related parties. This was because Alcoa billed less for its alumina, more than USD 420 million, resulting in a tax shortfall of more than AUD 213 million.
Court decision
The ART concluded that the ATO’s assessments were excessive and that Alcoa did not owe additional taxes. The court highlighted the importance of applying the Comparable Uncontrolled Price (CUP) method and the need for contextualized economic analysis and expert evidence in transfer pricing disputes.
Financial implications
As a result of the decision, Alcoa expects to receive a refund of approximately $67 million in June 2025. However, it will also have to pay approximately $216 million in taxes related to interest deductions by June 1, 2026. The net cash impact over the next fourteen months is estimated at $149 million.
Relevance for multinational companies
This case highlights the importance of having solid documentation and detailed economic analysis in transfer pricing policies. Companies must ensure that their transactions with related parties are carried out at market values and are supported by adequate technical studies to avoid tax disputes.
Specialized advice with TPC Group
At TPC Group, we offer specialized transfer pricing advice, helping companies comply with international tax regulations and mitigate associated risks. Our team of experts is prepared to assist in the preparation of transfer pricing studies and in defense before tax authorities.
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Source: MinterEllison