OECD TP guidelines in clash with recent VAT developments in Sweden

Transfer pricing (TP) and VAT are two different areas of tax that are profoundly connected to each other and interdependent when it comes to intra-group transactions.

However, new guidance and recently published court cases have turned the situation in Sweden upside down and moved the two areas further away from each other. The development in Sweden could mean that parent companies invoicing management fees to subsidiaries with mixed businesses – that conduct operations that are partially exempt from VAT – in accordance with established TP principles, may have to increase the management fee which will lead to increased costs for its subsidiaries.

Source International Tax Review