Nidera S.A. exported commodities (cereals, oilseeds etc.) via group traders domiciled on the British Virgin Islands. In the absence of evidence to the contrary, in transactions involving entities domiciled in low-tax jurisdictions, it was presumed that prices had not been agreed in accordance with the arm’s length principle. The tax authorities issued an adjustment by applying the “CUP” method (Sixth method), considering the statistical average prices set as a reference value by the National Secretariat of Agriculture, Livestock and Fisheries, corresponding to the date of shipment (and not to the date of agreement as claimed by the claimant). However adjustments were only made to those transactions where the quoted price was higher than the one agreed by Nidera S.A. An appeal was filed with the National Court by Nidera S.A. In 2016 the National Court of Appeals issud ist decision in the case. The decision was in favour of Nidera S.A. in regards to the approach of the tax authorities were only the unfavorable pricing were being adjusted whereas the favorable pricing were not, and referred the case back to the lower court. In all other regards the appeal of Nidera was dismissed and the assessment upheld. Both the tax authorities and Nidera S.A filed an appeal against this decision. Nidera complained about the incorrect use of the “comparable uncontrolled price” method, as it considers that this only allows a comparison between controlled and uncontrolled “agreement” prices, but not the use the prices at the date of “shipment”, as the Treasury did. The tax authorities appealed the part of the judgment under appeal which revoked the ex officio assessment on the grounds that it was unreasonable that, in order to calculate Nidera’s income tax for the 2001 tax period, the tax authority had adopted as valid the “comparable uncontrolled” price only in those transactions in which it was higher than the “agreed” price, whereas it did not do so when it was lower than the price declared by the exporter.” Judgement of the Supreme Court The Supreme Court decided in favour of the tax authorities and amended the 2016 decision National Court of Appeals. The court considers that the tax authorities’ adjustment-criterion does not appear to be contrary to the system adopted by Law 25.063, which is intended to challenge transfer prices only when they are lower than those obtained in “normal market practices between independent parties”, in order to safeguard the integrity of Argentine source income. On the contrary, it is clear that when the price of the transaction declared by the exporter is higher than the price agreed in normal market practices between independent parties, the Tax Authorities should not object, since the Argentine source income is not, in that case, compromised. This does not imply granting retroactive validity to the provisions of Law 25.784, but rather a logical application of the mechanism established by the legislator when enacting Law 25.063 to challenge transfer prices in order to protect, as stated above, the integrity of Argentine source income. Click here for English Translation Click here for other translation ...

Nidera S.A. exported commodities (cereals, oilseeds etc.) via group traders domiciled on the British Virgin Islands. In the absence of evidence to the contrary, in transactions involving entities domiciled in low-tax jurisdictions, it was presumed that prices had not been agreed in accordance with the arm’s length principle. The tax authorities issued an adjustment by applying the “CUP” method (Sixth method), considering the statistical average prices set as a reference value by the National Secretariat of Agriculture, Livestock and Fisheries, corresponding to the date of shipment (and not to the date of agreement as claimed by the claimant). However adjustments were only made to those transactions where the quoted price was higher than the one agreed by Nidera S.A. Judgement of the Court The Supreme Court accepted Nidera S.A.’s appeal in regards to the approach of the tax authorities were only the unfavorable pricing were being adjusted whereas the favorable pricing were not, and referred the case back to the lower court. In all other regards the appeal of Nidera was dismissed and the assessment upheld. Click here for English Translation ...