ecJ decision on the arm´s length principle regarding test claimants in the thin cap case of the high court of justice of the united kingdom: the eu test of the commercial reasons and its implication
DOI:
https://doi.org/10.51302/rcyt.2010.7123Keywords:
transfer pricing, thin capitalisation, OECD Transfer Pricing Guidelines, EU Court of Justice jurisprudence on antiabuse clauses, commercial purposesAbstract
The EU Court of Justice case law regarding the arm´s length principle raises some doubts about the scope of the commercial reasons that can reach acceptable when related parties perform an operation under conditions other than normal market. The High Court of Justice of the United Kingdom in the Thin Cap Group Case has made a broad interpretation of permissible justification whatsoever, including subjective type commercial reasons.
This article discusses the judgment, developing the various arguments used by the English Court to justify its position. It then lays out the different conceptions of the arm´s length standars (ALS), taking into account the evolution of this principle in the OECD context and in particular the major update of the Transfer Pricing Guidelines adopted in July 2010. Furthermore we analyse the OECD approach on the ALS and its compatibility with the position developed by the EU Court of Justice in the context of transfer pricing and capitalization. This piece of work also outlines the implications of this case within the scope of Spanish law, regulated in articles 16 and 20 of TRLIS.
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