On 26 April 2021, the Danish Supreme Court issued its decision in a landmark transfer pricing case: Denmark v Tetra Pak Processing Systems A/S [ No BS-19502/2020-HJR], in which a Danish company (Tetra Pak) that produced and sold plants for manufacturing ice cream. The Supreme Court upheld the Danish Western High Court 2020 judgment and concluded that the company’s inadequate transfer pricing documentation allowed the tax administration to make a discretionary decision.

In that case, the Supreme Court found that the Tetra Pak’s TP documentation did not meet the documentation requirements that, how prices with the sales companies were actually set, and also did not contain a comparability analysis, as required under the Tax Control Act and the Transfer Pricing Executive Order.

In addition, the Supreme Court highlighted that some of the numbers were estimated, including assessments relating to information accessible for the Danish corporation and numbers that could not be contributed to the individual product categories within the sales corporations. Thus, the transfer pricing documentation was surrounded by a great deal of uncertainty, and therefore it did not comprise sufficient information about the actual price determination.

The consequence was that the documentation was found to be inadequate because it did not provide a proper base for the tax administration to assess whether the arm’s length principle was met, i.e., it was equated with absent documentation and ground for a discretionary assessment by the administration. The Supreme Court therefore upheld the prior High Court’s decision.