Opinion Statement on the CJEU Case C-382/16 Hornbach (Transfer-Pricing/ Commercial Justification for Breach of the Arm’s Length Principle)

CFE Tax Advisers Europe has published an opinion statement on the judgment of the Court of Justice of the European Union in Case C-382/16, Hornbach-Baumarkt, concerning the application of transfer pricing rules to transactions between resident and non-resident associated enterprises.

CFE welcomes the Court’s approach in pursuing the SGI line of reasoning in allowing the taxpayer to invoke ‘commercial justification’ for breach of the arm’s length principle. In Hornbach-Baumarkt, the Court accepted “economic reasons resulting from its position as a shareholder of the non-resident company” as a valid “commercial justification”. Restriction to the possibility to invoke commercial justification for non-arm’s length transaction through automatic transfer pricing adjustments was deemed incompatible with EU Law (freedom of establishment). Contrary to the opinion of Advocate General Bobek, the Court confirmed the comparability of domestic and cross-border situations in transfer pricing cases, consequently, scrutiny of domestic transfer-pricing rules under the fundamental freedoms, which is welcomed by CFE in this ECJ Task Force statement.

We invite you to read the opinion statement on the link below.