In May 2025, the Supreme Administrative Court of the Czech Republic upheld a significant tax adjustment against Inventec (Czech), s.r.o., a subsidiary of the Taiwanese group Inventec Corporation. The court concluded that the Czech company should have received higher compensation for its contract manufacturing services provided in 2014.
Background to the case
Inventec (Czech), s.r.o. manufactured server cabinets for Hewlett-Packard on behalf of its Taiwanese parent company. The Czech tax authorities determined that the remuneration received by the subsidiary did not reflect market value, resulting in an adjustment of CZK 22,644,200 (approximately US$1.03 million) in corporate income tax, plus a fine of CZK 3,344,076.
Court decision
The Supreme Court upheld the tax authorities’ position, stating that the Czech subsidiary should have been compensated in accordance with the arm’s length principle. The court emphasized the importance of adequate documentation and comparable analysis to support transfer pricing policies.
Implications for multinational companies
This ruling underscores the need for multinational companies to:
- Document their transfer pricing policies thoroughly.
- Perform robust comparable analysis to support remuneration between related entities.
- Ensure that compensations reflect market value, especially in contract manufacturing transactions.
How can TPC Group help?
At TPC Group, we have a team of experts in Transfer Pricing and International Taxation who can advise you on business restructuring processes, ensuring regulatory compliance and optimizing your tax position. Contact us for a personalized consultation.
Source: TPCases