Extended Background

In Denmark’s competitive tech and electronics sector, slim margins and shifting business models are normal. EET Group, an electronics distributor, reported affiliate profits outside Denmark’s statistical interquartile range (IQR), raising red flags in a jurisdiction known for strict numerical benchmarking.

Detailed Arguments

Taxpayer

• Presented a detailed functional analysis to justify margins below the IQR.

• Emphasized commercial realities, cycles, and unique market risks impacting its Danish operations.

Tax Authority

• Relied on IQR thresholds, claiming that deviation alone implies non-arm’s-length pricing.

• Dismissed the value of in-depth documentation and benchmarking not matching their percentile expectations.

Court Reasoning

• The Supreme Court prioritized substance: high-quality documentation could trump raw statistical results.

• Affirmed that being below-range is not itself proof of mispricing if the facts support the outcome.

Procedural Journey

• Began as a tax audit; escalated through appeals to Denmark’s Supreme Court.

• The taxpayer ultimately prevailed, with no penalty or adjustment imposed.

Implications Beyond the Case

• Set a crucial precedent: MNEs with thorough, fact-specific documentation can defend non-benchmark outcomes.

• Applies across Europe, especially where statistical approaches dominate local enforcement.

• Compliance advice: Always compile a functional, comparables-rich backup—not just margin math.

Original Case Link:

Atlas Tax case summary