Cabot Transfer Pricing wins an appeal against a 1 million lei tax decision11 December 2023
Cabot Transfer Pricing wins an appeal against a 1 million lei tax decision received by a furniture manufacturer following a tax inspection, a decision that entailed both major adjustments to income from the sale of furniture to its own resident affiliates, as well as related VAT adjustments.
The tax inspectors who carried out the control considered that the company in question – the furniture manufacturer – did not apply the contractual provisions related to the intra-group contracts and did not adjust the sales prices of goods with the possible price increases of the raw material, accordingly adjusting the revenues intra-group of society. The current decision was based on an adjustment percentage established in a previous inspection of the same taxpayer, uncontested at that time. Moreover, the tax inspectorate also decided to collect VAT on additional established incomes.
Following the arguments provided by Cabot Transfer Pricing, the appeals resolution body justified the total annulment of the fiscal inspection’s imposition decision regarding the collected VAT, as well as the partial annulment of the decision on the change of the taxation base as a result of the adjustment intra-group revenues. Cabot’s argument emphasized the following points, namely:
• the fact that the petitioner did not challenge the previous taxation decision (regarding the same case) does not constitute a reason for the tax inspection bodies to proceed with the adjustment of the operating income according to the previously issued fiscal administrative acts,
• in the circumstance where the intra-group contracts do not provide for a specific quota by which the intra-group prices are increased, the settlement body considers that the income adjustment was not carried out as a result of the analysis of the transfer pricing file, as a result of the collection of VAT related to the transactions intra-group is not justified,
• the very approach of the tax inspection bodies was not uniform, i.e. they only adjusted the intra-group revenues related to the years in which the company registered a loss.