Use of TNMM - S.C. of Argentina - Volkswagen Argentina S.A. (VWA) vs Argentina

Dated 13 August 2024

In Volkswagen Argentina S.A. v AFIP, the Argentine Supreme Court addressed key issues concerning the application of the TNMM method in transfer pricing disputes. The case involved the inclusion of a $177.8 million loan forgiveness in the Rate of Return on Capital Employed (RRCE) and the use of a multi-year RRCE average rather than a single-year metric for 2001.

While the Tax Court sided with Volkswagen Argentina, justifying both the inclusion of loan forgiveness as operational income and the multi-year approach due to sectoral fluctuations, the Supreme Court overturned this decision. It held that loan forgiveness was financial rather than operational, distorting comparability, and ruled that multi-year RRCE violated income tax regulations by not aligning with the specific tax year.

This decision underscores the importance of adhering to accurate accounting classifications and using year-specific data in transfer pricing analyses.

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