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💥 When Marketing Drives Billions: GSK’s $3.4B US vs. UK Settlement
GSK, a leader in the pharmaceutical sector, developed breakthrough drugs through UK-based research and intellectual property. However, major value was also created through its intensive US marketing and distribution network. This difference in business functions sparked a fundamental question: Should profits be split based on where drugs are invented, or where they are branded and sold? GSK adopted a traditional TP structure: UK R&D entities owned patents and supplied the US affiliate, which handled all local marketing. This split mimicked industry norms before BEPS and the OECD overhaul on intangibles, with MNEs emphasizing legal ownership as the basis for profit allocation.
🛒 Amazon’s Big Intangible Win: “No Place for Imaginary Value”
Amazon’s digital business relies on massive, globally shared technology platforms. To align costs and profits cross-border, Amazon’s EU subsidiary participated in a cost-sharing arrangement for platform development. At the time, international practice around the scope of IP valuation was still evolving, and regulatory definitions of “intangibles” were narrower than today.
🥤 No More Sacred Cows: Coca-Cola’s $3.3B Formula Fizzles
Coca-Cola’s core profit engine has always relied on both secret formulas and global brand marketing—split across US and foreign affiliates. For decades, the IRS accepted a safe-harbor profit split that assigned a steady share to the US parent and bottling affiliates, based on legacy practices, not current benchmarks. Before the BEPS push, longtime agreements and APAs (Advance Pricing Agreements) were typically respected if adhered to. But shifting business models and new benchmarking raised questions about whether such formulas still reflected economic reality.
🍏 The €13B Headache: “Stateless” Apple Profits Smashed by EU Law
The tech industry’s rapid globalization spotlighted the use of low-tax jurisdictions within the EU—none more famous than Apple’s “stateless” Irish structures. By routing European profits to Irish holding companies without substantial local operations, Apple minimized its overall tax bill. This was standard practice before aggressive state aid enforcement and OECD intangibles guidance became mainstream.
🚗 Selectivity Scrutiny: Fiat’s Luxembourg Finance Structure Stands
Automotive groups frequently tap favorable financial regimes within Europe, using group financing structures to optimize global funding costs. Fiat established a treasury center in Luxembourg, applying local TP rules to set intra-group lending rates—common practice before the EU’s broad state aid enforcement push.
🍔 Big Mac Royale: A €1.25B Lesson in Royalty Substance
Global retail and franchising models like McDonald’s hinge on the payment of royalties for brand, know-how, and business support. France, a key market, became ground zero for challenges to the cross-border payment of royalties to group entities in favored tax jurisdictions—in this case, Luxembourg.
📊 Outlier, Not Out-of-Luck: Denmark’s Supreme Court Picks Proof Over Percentile
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.
📡 Vodafone’s $2.2B Indian Indirect Transfer Stunner
Telecom MNEs like Vodafone operate across complex group structures, especially in fast-growing markets like India. The company executed a major offshore M\&A deal, acquiring control of an Indian subsidiary through foreign holding companies. At the time, Indian tax law’s reach into such “indirect” asset transfers was ambiguous.
🔁 Audit Whiplash: SABIC India’s Benchmarking Win
India’s manufacturing sector hosts many foreign MNEs, like SABIC, that provide marketing and support services to overseas group entities. Transfer pricing enforcement in India is robust, and authorities sometimes try to change accepted benchmarking to boost assessments.
⛏️ Mining for Value: Australia’s A$1B Marketing Hub Settlement
Australia’s prosperous mining sector heavily features resource giants like Rio Tinto, which established a Singapore marketing hub for selling locally mined ore. The hub centralized sales, marketing, and logistics for Asian and global buyers—a legitimate business model, but one with TP challenges on profit allocation.
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