Czech Supreme Court Confirms Cost Plus Method in Intra-Group Services Case

July 2024

The Czech Supreme Administrative Court ruled on a transfer pricing dispute between BEAS SUN s.r.o. and the tax authorities regarding the appropriate method to determine the arm’s length price for intra-group low value-added services. The authorities had applied the Cost Plus method, using the parent company's wage base with a 7% mark-up, in line with Guideline D-10.

BEAS SUN argued that the Comparable Uncontrolled Price (CUP) method should have been used instead. However, both the Regional Court and the Supreme Court found that the CUP method requires high comparability and is only preferred when comparable independent transactions exist—none of which were identified in this case. The Cost Plus method was deemed appropriate due to the nature of the services and lack of comparables.

The Court upheld the authorities’ application of Guideline D-10 and OECD principles, concluding that the taxpayer failed to demonstrate why the chosen method was inappropriate or provide better comparables.

Full Link to English Translation: https://tpcases.com/czech-republic-vs-beas-sun-s-r-o-july-2024-supreme-administrative-court-case-no-6-afs-255-2023-65/