In June 2025, the Supreme Court of the Netherlands (Hoge Raad) ruled on the Supermarket BV case (Case No. 22/00900, ECLI:NL: HR:2025:850), a highly significant dispute concerning the sale of a supermarket leasehold and the resulting tax assessment of the gain derived therefrom. Although it is not a usual case of Transfer Pricing among related entities, the decision addresses fundamental principles that directly affect the interpretation and documentation of fair value in economic transactions.
Background
The dispute arose following the sale in 1999 of the leasehold rights of a property operated by Supermarket BV. In its tax return, the company reported a profit of NLG 226,000, equivalent to the price received for the leasehold rights. Conversely, the Dutch Tax Administration (Belastingdienst) questioned this figure, arguing that the actual market value of the rights amounted to NLG 1.1 million, based on an economic and expert analysis. Consequently, the authority applied a correction to the corporate income tax.
The first instance tax court, as well as the Arnhem-Leeuwarden Court of Appeal, ruled in favor of the administration. The company appealed to the Supreme Court, asserting that its appraisal was valid and that it was neither intended to conceal information nor was there fraud or gross negligence.
Decision Grounds
The Supreme Court dismissed Supermarket BV’s appeal, upholding the tax adjustment applied by the administration. The ruling is based on the following grounds s:
- Substantial unexplained difference: The difference between the declared value (NLG 226,000) and the estimated market value (NLG 1.1 million) was considered significant enough to conclude that the company should at least have known that its appraisal was incorrect or substantially lower than the fair value.
- Taxpayer liability: Given the significant discrepancy between the market value and the declared value, the taxpayer should support its appraisal. Supermarket BV failed to present arguments or documentation that support the reported figure.
- Tax bona fide principle: The Court recalled that tax compliance requires reasonable diligence and good faith in determining market value. The lack of valid technical or economic grounds to support the declared value may justify rejecting the return filed.
Relevance for Transfer Pricing Issues
Although the ruling does not deal with a related party transaction, its logic applies to Transfer Pricing analysis for several reasons:
- Market price appraisal: In both independent and related-party transactions, the price must reflect market conditions. This case highlights solid technical grounds to support the economic value declared to the tax authority.
- Reversal of the burden of proof: When the administration demonstrates a significant difference between the declared value and the market value, the burden of proof falls on the taxpayer, who must provide the appraisal grounds.
- Importance of contemporary documentation: Although there were no formal Transfer Pricing documentation requirements, the decision underscores the importance of taxpayers having studies, expert reports, or other types of ex ante documentation to support the reported value.
Final Considerations
The ruling in the Supermarket BV case highlights the importance of applying objective economic criteria and adequate documentation in determining the market value of assets. Even when a transaction does not involve related parties, the market standard remains the benchmark for the Dutch tax authorities. Companies should be aware that any omission or deficiency in supporting documentation may result in significant tax adjustments and cast doubt on the accuracy of the reported figures.