The legal question in this case was the arm's length nature
of the contract manufacturing service fee when the imputed location
savings were included in the cost base when calculating the service
fee for the contract manufacturing services provided by the
Estonian subsidiary B AS for the Finnish parent A Oyj. The case
concerned the transactions performed in 2004 and 2005.
The Finnish company A Oyj had a contract manufacturing
subsidiary B AS established in Estonia. A Oyj had transferred part
of its manufacturing to its Estonian affiliate. The pricing of the
intra-group services rendered by B AS was established by applying
the TNMM (Transactional Net Margin Method). When applying the TNMM
half of the imputed Location Savings were added to the cost base
when calculating the remuneration for B AS. During the annual
assessments and in the reassessment decision made after the
conducted tax audit, only actually realised costs and mark-up were
accepted as tax-deductible
