Norway: Tax authorities may use "secret comparables"

Norway: Transfer pricing examinations

Tax authorities may have information available to them from examinations of other taxpayers or from other sources of information not disclosed to taxpayers undergoing transfer pricing audits. The use of this information, when determining the arm's length price, is referred to as the use of “secret comparables.” In a recent decision, the Norwegian Supreme Court held that the Norwegian tax authorities may use such secret comparables. The Supreme Court found that the Norwegian tax authorities had provided the taxpayer with sufficient information regarding the secret comparables—third-party contracts provided by other taxpayers—for the taxpayer in this case to have an adequate opportunity to defend its own position and to invoke effective judicial safeguards by the courts.

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In the case before the high court, a Norwegian resident oil company sold gas to a related-party company. The oil company / taxpayer was the subject of a tax audit, and the Norwegian tax authorities concluded that the company's transfer pricing determinations for its related-party gas sales were not in adherence with the arm's length principle.

The tax authorities conducted a discretionary assessment of income and used contracts that had been provided to the tax authorities by other taxpayers—third-party contracts—in performing the comparability analysis. The tax authorities did not fully disclose these contracts to the taxpayer, due to confidentiality rules barring the disclosure of sensitive information.

At issue was whether the tax authorities were required to fully disclose the third-party contracts and whether the tax authorities were allowed to base a reassessment on secret comparables. 

Confidentiality rule

The Supreme Court first assessed whether the duty relating to confidentiality prevented the tax authorities from sharing the third-party contracts with the taxpayer. The high court concluded that the tax authorities could not share the third-party contracts with the taxpayer because of the confidentiality rule.

Because the Supreme Court concluded that the confidentiality rule blocked full disclosure of the third-party contracts, the next question was whether the Norwegian tax authorities could base its reassessment on secret comparables.

The Supreme Court referred to measures under the OECD transfer pricing guidelines—i.e., tax authorities must use great care when relying on information available to them from examinations of other taxpayers within the limits of the domestic confidentiality requirements.

According to the Supreme Court, the tax authorities had shared with the taxpayer as much information about the third-party contracts as they could without violating the domestic confidentiality rule. Therefore, the Supreme Court found that the tax authorities could use the third-party contracts—the secret comparables—in their comparability analysis. The Supreme Court explained that the tax authorities had shared sufficient information about the third-party contracts so that the taxpayer would have had an adequate opportunity to defend its own position and to invoke effective safeguard controls by the courts. 

In addition, the high court emphasized that the taxpayer had received several enquiries regarding resale prices from the tax authorities, but had not provided a satisfactory response.

The Supreme Court concluded that the tax authorities were allowed to use secret comparables.

KPMG observation

The case illustrates a conflict between a taxpayer’s right to have access to evidence and the duty of confidentiality imposed on the tax authorities. Further, the case also sheds light on the level of disclosure required in order for the tax authorities to use secret comparables.

Even though this decision and a previous decision regarding captive insurance have allowed the use of secret comparables, tax professionals in Norway have expressed an opinion that the tax authorities need to refrain from using data or information from other sources that may not or cannot be disclosed to the taxpayer. As has been observed, when the tax authorities use secret comparables, the taxpayer has a limited opportunity to defend itself and the courts' have a limited ability to control the discretionary assessment performed by the tax authorities. Further, the use of secret comparables may affect a taxpayer's right to due process. Still, despite these concerns, this decision of the Supreme Court shows that the Norwegian courts may accept the use of secret comparables in certain cases.


For more information, contact a tax professional with the KPMG member firm in Norway:


Jan Samuelsen | +47 40 639 395 |

Marius Basteviken | +47 40 639 032 |

Lene Lodde | +47 40 639 598 |

Per Daniel Nyberg | +47 40 639 265 |

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