Orange Business Norway AS, a subsidiary of the French Orange Telecom Group, had been issued a tax assessment for FY 2006-2008.
According to the Norwegian tax authorities, Orange Business Norway had determined the remuneration by applying a Profit Split Method in a way that closely resembled Global formulary apportionment.
The tax authorities also found that a Profit Split approach was not suitable for the case and instead determined the income of Orange Business Norway based on the Transactional Net Margin Method.
The Court of Appeal concluded that the tax authorities had not proven that the income of Orange Business Norway had been reduced due to common interests with other group companies, cf. SKL § 13-1 (1) and the OECD transfer pricing guidelines.
Like the district court, the Court of Appeal concluded that the profit split method (PSM) had not been incorrectly applied by the company. Furthermore, the internal pricing determined by the company was sufficiently substantiated by the functional analyzes.
The tax authorities had not proven a reduction in income due to common interest. The comparability analysis provided, where the operating margin had been compared to nine allegedly comparable companies, could not be given weight due to significant differences in the nature of the business, size, etc.
Norway vs Orange Borgarting lagmannsrett 2020