In case concerns the tax implications of four reinsurance agreements concluded between Codan Forsikring (Codan Insurance) and a controlled Irish company, RSA Reinsurance Ireland Ltd. for FY 2010-2013. The tax authorities had increased Codan Insurance’s taxable income for FY 2010, 2011 and 2012 by DKK 23 million, DKK 25 million, and DKK 18 million and reduced the taxable income for FY 2013 by DKK 4 million. At issue was whether expenses incurred by Codan for reinsurance of policies in Ireland were commercially justified and thus deductible. If so, there were questions as to whether the reinsurance agreements were concluded at arm’s length and whether Codan Insurance’s transfer pricing documentation met the requirements that could be made. By decision of 26 June 2019, the Tax Court reduced the assessment to DKK 0 for the 2010-2012 tax years and upheld Codan’s taxable income for FY 2013. An appeal was filed by the tax authorities. Judgement of the Eastern High Court The High Court upheld the decision of the tax Court and set aside the assessment of the tax authorities. The Court found that the reinsurance agreements with the Irish subsidiary served a commercial purpose and that there were no grounds for setting them aside. The significance of the existence of a controlled relationship between Codan Forsikring and RSA Reinsurance, including the determination of the amount of the commission, had then to be assessed according to the rules on arm’s length correction of transactions between related parties. The Regional Court further found that the transfer pricing documentation was not deficient to such a significant extent that it could be equated with a lack of documentation and that Codan Insurance’s income could not, on the basis specified, be assessed on an estimated basis pursuant to section 3B(8) of the current Tax Control Act, cf. section 5(3). Finally, the Regional Court found that the reinsurance agreements were not outside the scope of what could have been agreed between independent parties, cf. The Regional Court therefore upheld Codan Forsikrings’ claim for acquittal. Click here for English Translation ...