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The Landmark Adecco Decision – a Deterrent Against “Cherry Picking”?
Danish Supreme Court Rules in Favor of a Taxpayer with Respect to Intercompany Royalties Payments
The case discusses whether royalties charged by Adecco Switzerland to Adecco Denmark for the use of the group’s IP in Denmark were at arm’s length in light of Danish domestic tax law and the OECD TPG. However, the case goes beyond mere transfer pricing issues and addresses whether royalties paid to Adecco Switzerland were deductible to the extent that the expense was necessary to generate income in Denmark. The Danish Supreme Court held that there was no basis for the Danish tax authorities’ royalty adjustment, thereby setting aside previous rulings of the Danish National Tax Tribunal and High Court.
1. Introduction
On June 25th, 2020, the Danish Supreme Court published its ruling in a landmark transfer pricing case on intercompany royalties. The dispute concerned whether royalties paid by Adecco Denmark in 2006 to 2009 to the Swiss related IP owner and parent for use of trademarks and trade names, know-how, international network intangibles, and business concept were deductible expenses for tax purposes or not and whether the royalties paid were at arm’s length.
The position of the taxpayer prevailed over the position of Danish tax authorities (SKAT) setting aside that
royalties were ...