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Sweden: Timing of data, information to test benchmarking analysis

Sweden: Timing of data, benchmarking analysis

The Administrative Court of Appeal in Stockholm issued its decision concerning questions related to the timing of data and information in a benchmarking search that can be used to test whether a price is at arm’s length. The court found that the use of several years of data and information—from the year under review and from previous years—would apply. However, data and information from years after the year under review would constitute “hindsight” and, as such, would not be supported by case law.

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The court found support in the OECD Transfer Pricing Guidelines:

  • For the timelines that can be used in a benchmarking search
  • That it is often necessary to access data and information from both the year under review and previous years
  • That information from years after the year under review may be relevant in the analysis of internal prices, but that taxpayers need to use care and avoid using hindsight (eftersyn)

The Administrative Court of Appeal, therefore, concluded that the OECD Transfer Pricing Guidelines support the use of several years of data in determining an arm's length price; and that data and information from the year under review and from previous years may be applied in the arm’s length analysis. The court explained that this approach would be the starting point for the three-years’ profit margins to be applied in the analysis of internal prices. However, the use of years after the year under review would constitute hindsight (eftersyn) and, as such, would not be supported by case law.

The court also addressed the importance of applying the interquartile range in a benchmarking search and if companies within the same corporate group operating in different jurisdictions can use different ranges in the benchmarking search to set an arm's length price on the same transaction. 

 

Read a January 2018 report prepared by the KPMG member firm in Sweden

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