In May 2025, the Danish Supreme Court issued a landmark ruling in Denmark vs. EET Group A/S (Case No. BS-35371/2024-HJR), addressing critical issues regarding Transfer Pricing documentation and the application of the Arm’s Length Principle.
Background
EET Group A/S, a pan-European technology distributor, was audited by the Danish tax authorities, who questioned the proper application of Transfer Pricing in sales to its subsidiaries in Spain and Norway during the fiscal years 2010 – 2012. The authorities claimed that the subsidiaries obtained margins higher than those of comparable limited-risk distributors, which would indicate possible overcompensation and, therefore, an underestimation of taxable income in Denmark.
Supreme Court Ruling
The Supreme Court ruled in favor of EET Group, highlighting that:
- The Transfer Pricing documentation filed by the company was not significantly deficient.
- The margins of some subsidiaries outside the interquartile range of comparable companies did not sufficiently support that transactions were not at market prices.
- The information available on comparable companies was limited, reducing the usefulness of interquartile range calculations in this case.
Implications for Multinational Companies
This ruling sets an important precedent, emphasizing that:
- Tax authorities must provide solid evidence before making Transfer Pricing adjustments.
- The mere deviation of margins from the interquartile range does not, in itself, justify a tax adjustment.
- Proper and consistent documentation supporting the Transfer Pricing policies applied is essential.
Transfer Pricing Advice
At TPC Group, we have an experienced team at your disposal to evaluate and strengthen your Transfer Pricing policies, ensuring compliance with international and local regulations. Contact us for a customized consultation.
Source: TPCases