VingCard / Elsafe had entered into a distribution agreement with related party AAH Inc. The agreement governed the internal price setting so that AAH Inc was guaranteed an annual net margin of between 1% and 5%. The interval was later changed to 1.1% – 2.9% in line with the conclusions in the internal price study. In question was the use of the Transactional Net Margin Method (TNMM) method in connection with pricing. Judgement of the Court The court pointed out that the US distributor company was left with a limited profit which reflected the company’s role in the transaction, and that it should be possible for group companies to enter into such an a agreement. A transfer pricing model which grants guaranteed return to a foreign distributor (return on sales method with a range) as well as true-up payments including year-end adjustments of the income of the distributor, could be accepted from a Norwegian tax perspective. Click here for translation ...