An agreement had been entered between AB Tetra Pak and Tetra Pak International, according to which AB Tetra Pak conducted research and development on behalf of Tetra Pak International and was compensated on a cost plus 3 percent basis. The Swedish Tax Agency, after examining four comparable businesses and their profit levels, concluded that the remuneration of AB Tetra Pak should have been cost plus 7 percent. The Administrative Court of Appeal ruled in favor of AB Tetra Pak. The burden of proof for transfer pricing not being at arm’s length was on the tax authorities. The Court refereed to the OECD’s TPG art. 3.38. – decisive for the selection of comparables is whether their activities are sufficiently comparable to the R&D activities conducted by AB Tetra Pak. The Court also referred to TPG art. 2.55 where it is stated that the profit margin in contract research arrangements should reflect the complexity of the activities” Click here for translation ...